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Movie Gallery Makes Payment

Bondholders get a check.

Movie Gallery (MOVI) surged 9% Wednesday after the struggling video chain paid bondholders and promised to stay current on its debt this year.

The Dothan, Ala., company said it made a $17.9 million interest payment to holders of its 11% senior unsecured notes, which are due in 2012. The interest payment to bondholders follows Movie Gallery's $28.4 million term loan principal and interest payment to bank lenders at the end of September.

Movie Gallery said it believes that cash on hand, cash from operations, cash from non-core asset sales, and available borrowings under its revolving credit facility will be sufficient to operate the business, satisfy working capital and capital expenditure requirements, and to meet the company's foreseeable liquidity requirements -- including remaining in compliance with the financial covenants contained in the credit facility and debt service for the remainder of fiscal 2006.

Shares rose 19 cents to $2.41.

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