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Monday, November 10, 2008
Circuit City Files For Bankruptcy Protection
Kathryn Elizabeth Tuggle
FOXBusiness
Circuit City Stores (CC), the second largest retailer of consumer electronics in the U.S., filed for Chapter 11 bankruptcy protection on Monday. It obtained a $1.1 billion bankruptcy financing package to replace a $1.3 billion line of credit.
The Richmond, Va.-based company cited the economic slowdown and tight credit market as well as loss of sales to Best Buy (BBY) and Wal-Mart (WMT) as reasons for its decline.
The filing stated that Circuit City had more than 100,000 creditors as of August 31, and had $2.32 billion in debt and $3.4 billion in assets. The company owes Samsung Electronics a total of $116 million, Sony $60 million and Hewlett-Packard (HPQ) $119 million, according to The Wall Street Journal.
Circuit City reported on November 3 that it would close 155 of its 721 retail stores nationwide, which is approximately 20% of its retail venues, eliminating 17% of its total work force in the U.S.
Signs that Circuit City was in trouble have been mounting for some time. In May, the company tried to sell itself to Blockbuster Inc. (BBI), and in September the company retained FTI Consulting for restructuring.
Founded in 1949, Circuit City has lost money in five of the past six quarters, and has lost over $5 billion in market capitalization in the past 24 months. Reported losses for the third quarter were $239.2 million, triple from the previous year.
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