Movie Gallery's bonds and bank debt fell on the announcement Apple Computer has launched a new movie service that may compete with the video rental store operator. A dealer said the market is concerned the service will harm Movie Gallery's business by discouraging more people from renting movies from its stores. Movie Gallery's 11% '12 bonds fell four points to 60. Its term loan "B" was down 3/4 of a point to 93-94 1/2. Competitor Blockbuster also saw its bonds drop. Its 9% '12 bonds fell a point and a quarter to 91 1/2. Its bank debt has not really moved since the announcement.
It is the first time Apple has provided movies as part of its iPod product portfolio. The new product, iTunes 7, will allow users to watch TV shows and movies. Its iTunes store is now offering more than 75 movies customers can buy and download to watch on their computers and iPods.
In August, Movie Gallery reported a $14.9 million net loss in the second quarter, compared with a $12.2 million net loss in the same period last year (CIN, 8/21). Adjusted EBITDA was $57.6 million, compared with $60.2 million in the same quarter of 2005. The company said in a release it continues to be affected by a weak home-video release schedule. A Movie Gallery spokesman declined to comment on the trading of its debt.