Movie Gallery Reportedly to File Chapter 11 - TheStreet

Movie Gallery Reportedly to File Chapter 11

Movie Gallery, the movie-rental chain, is preparing to seek Chapter 11 protection from creditors as soon as next Tuesday, a report says.
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WILSONVILLE, Ore. (

TheStreet

) --

Movie Gallery

, the movie-rental chain, is preparing to seek Chapter 11 protection from creditors as soon as next Tuesday, the

Wall Street Journal

reports.

As part of the bankruptcy restructuring, Movie Gallery could close roughly 1,800 stores or two-thirds of its outlets, leading to significant layoffs, sources told the

Journal.

Movie Gallery is currently negotiating a "prearranged" bankruptcy with lenders who could approve a restructuring plan ahead of a bankruptcy filing, the

Journal's

sources added. The talks reportedly are on Movie Gallery swapping a "significant" amount of debt for equity.

The company is also talking with liquidation firms to help close stores, these people said.

Movie Gallery didn't respond to the

Journal's

requests for comment.

The company has been struggling to cope with changes in consumer preferences as consumers turn to alternatives such as Redbox, a unit of

Coinstar

(CSTR) - Get Report

, and

Netflix

(NFLX) - Get Report

, and devices such as

Apple's

(AAPL) - Get Report

iPod, the

Journal

notes.