November 10, 2008
Electronics retailer Circuit City says it has filed for Chapter 11
bankruptcy protection, falling victim to the credit crunch and
heightened competition from Best Buy and Wal-Mart.
The move comes less than a week after the struggling retailer announced it was closing 155 stores.
The company said it plans to continue operating the business as it develops a restructuring plan. Circuit City's Canadian operations also will be seeking protection under the Companies' Creditors Arrangement Act in Canada.
Circuit City said it plans to maintain normal operations with fewer stores and employees. It has asked the court for the authority to make wage and salary payments and continue various benefits for employees as well as honor customer programs such as returns, exchanges and gift cards.
Circuit City said it has negotiated a commitment for a $1.1 billion debtor-in-possession (DIP) revolving credit facility to supplement its working capital.
The DIP facility replaces the company's $1.3 billion asset-based credit facility and is being provided by the same lenders. The facility provides additional immediate liquidity while the company works to reorganize the business and will permit the company to pay vendors and other business partners for goods and services received after the filing.
"We recently have taken intensive measures to overcome our deteriorating liquidity position," said James A. Marcum, vice chairman and acting president and chief executive officer. "The decision to restructure the business through a Chapter 11 filing should provide us with the opportunity to strengthen our balance sheet, create a more efficient expense structure and ultimately position the company to compete more effectively.
"In the meantime, our stores remain fully operational, and our associates are focused on consistent and successful execution this holiday season and beyond," he said.
