And a major retailer takes a hit from the recession/depression: Circuit City Stores has filed a voluntary petition for reorganization relief under Chapter 11 and plans to continue operating the business without interruption as management focuses on developing and executing a comprehensive corporate restructuring plan. Circuit City’s Canadian operations also will be seeking protection.
In conjunction with the filing, Circuit City is seeking customary authority from the Bankruptcy Court that will enable it to continue operating its business and serving its customers in the ordinary course. The requested approvals include requests 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. In addition, Circuit City 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.
James A. Marcum, vice chairman and acting president and chief executive officer of Circuit City Stores, Inc., said, "We recently have taken intensive measures to overcome our deteriorating liquidity position. 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. We appreciate the support we have received from our lenders in the midst of such a tight credit market. With this support, we believe we have the opportunity to leverage our market position and the strength of our brand to restore Circuit City to solid financial footing."