Movie Gallery, the nation’s number 2 DVD rental chain, has managed to convert $151.4 million in first-lien debt into just over 15 million shares of common stock valued at $10 per share.  Last month Movie Gallery and Sopris Capital Advisors, the private equity firm that has invested heavily in Movie Gallery sought to convert up to $205 million of first lien debt into common stock.  While the company was not able to convert as much debt as it wanted, it did accomplish about three quarters of its goal, and the results should significantly improve the company’s balance sheet and lower ongoing interest expense.

When the Dothan, Alabama-based Movie Gallery emerged from Chapter 11 bankruptcy in May (see “Movie Gallery Emerges from Bankruptcy”), Sopris managed to convert some $72 million of the company’s $175 million second-lien debt to stock in the restructured company.