As expected the beleaguered movie rental chain Movie Gallery has filed for Chapter 11 bankruptcy (see 'Movie Gallery Headed for Chapter 11').  The filing lists debts of $1.4 billion and assets of $892 million.  The pre-packaged bankruptcy agreement calls for private investment fund Sopris Capital Advisers to invest $50 million with $325 million in bonds and other unsecured claims being converted into new equity in the reorganized company.  Movie Gallery is also hoping to get approval of a $150 million debtor-in-possession financing agreement with Goldman Sachs.

The bankruptcy agreement cancels all existing shares in the company, but current equity holders would get an estimated 2% equity stake in the reorganized company.  In spite of efforts to cut costs (see 'Movie Gallery Shutters 520 Stores'), the mammoth chain that includes 4,000 stores operating under the Movie Gallery and Hollywood Video names has been unable to deal with its debt load.  Many industry experts attribute Movie Gallery's problems to increased competition from online video renters like NetFlix.