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RICHMOND, Va. -- Circuit City Stores Inc., the nation's second-biggest electronics retailer, filed for bankruptcy protection Monday, but plans to stay open for business as the busy holiday season approaches, The Associated Press reported.
The retailer said it decided to file for bankruptcy protection because it was facing pressure from vendors who threatened to withhold products during the holiday shopping period. The company also said it cut 700 more jobs at its headquarters, after announcing a week ago it would close 20 percent of its stores and lay off thousands of workers. Earlier this year, Circuit City was the target of an unsuccessful takeover attempt by Dallas-based entertainment software retailer, Blockbuster Inc.
Circuit City filed under Chapter 11 of the bankruptcy code, which will allow it to hold off creditors and continue operations while it develops a reorganization plan. Its Canadian operations also filed for similar protection, said the report.
The bankruptcy 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," James A. Marcum, vice chairman and acting president and chief executive, said in a statement.
In court documents, Chief Financial Officer Bruce H. Besanko said three factors led to the bankruptcy filing: erosion of vendor confidence, decreased liquidity and the global economic crisis.
"Without immediate relief, the company is concerned that it will not receive goods for Black Friday and the upcoming holiday season, which could cause irreparable harm to the company and its stakeholders," Besanko said in the filing.
The company's biggest creditors are its vendors: Hewlett-Packard has a $118.8 million claim followed by Samsung ($115.9 million), Sony ($60 million), Zenith ($41.2 million), Toshiba ($17.9 million) and others. Smaller creditors include GPS navigation system maker Garmin, Nikon, Lenovo, Eastman Kodak and Mitsubishi.
Circuit City also said last week it will further cut back on new store openings and planned to work with landlords to renegotiate leases, lower rent or terminate agreements while it dealt with tightening credit from its vendors.