S&P: Hollywood Entertainment still on watch developing

Standard & Poor's said its ratings for Hollywood Entertainment Corp., including the B+ corporate credit rating, remain on CreditWatch developing, where they were initially placed on March 29, 2004 when Hollywood had announced it entered into a definitive merger agreement to be acquired by an affiliate of Leonard Green & Partners LP.

Also on watch are Hollywood Entertainment's BB- secured bank loan rating and B- subordinated debt rating.

S&P said this CreditWatch update follows the announcement that unrated Movie Gallery Inc. agreed to acquire Hollywood Entertainment for about $850 million in cash, plus debt. At the same time, Hollywood terminated its merger agreement with an affiliate of Leonard Green & Partners.

The Movie Gallery offer is higher than Blockbuster Inc.'s (BB/Watch Negative/--) Nov. 11, 2004 offer of $700 million plus debt. The listing on CreditWatch reflects the possibility that Blockbuster may increase its offer for the company, according to S&P.

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