Circuit City Declares Bankruptcy

Just a week after announcing plans to close 155 stores, Circuit City has filed for bankruptcy protection in order to keep its remaining stores open.

Just a week after announcing it would be closing 155 stores before the holiday buying season gets fully underway, Circuit City has announced it has 3 in order to keep its remaining locations open for business. Circuit City was forced to make the move after vendors expressed serious doubts the company would be able to pay for products it planned to move into its stores; filing for Chapter 11 bankruptcy protection assured vendors they will get paid for merchandise Circuit City puts into its stores; the company also plans to undergo a significant restructuring in order to return to profitability, and says it has secured $1.1 billion in debtor-in-possession financing.

“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,” said Circuit City vice chairman and acting president and CEO James A. Marcum, in a statement. “In the meantime, our stores remain fully operational, and our associates are focused on consistent and successful execution this holiday season and beyond.”

The lenders offering the $1.1 billion in debtor-in-possession financing are the same ones who supported Circuit City’s $1.3 billion in credit prior to bankruptcy. The cash will let Circuit City pay vendors and give it resources to try to re-organize its business. The company has also announced some 700 layoffs at its corporate headquarters, bringing the company’s total recent job cuts to about 20 percent of its workforce.