In a last-ditch effort to keep operating, consumer-electronics giant Circuit City has filed for bankruptcy protection in both the United States and Canada.
Just days after the Richmond, Va.-based company announced it would close 155 of its 770 retail stores and cut 20 percent of it U.S. workforce, Circuit City on Monday said it has faced significant financial challenges and needs to file for Chapter 11 protection in the United States, while seeking protection under the Companies’ Creditors Arrangement Act in Canada.
“Despite our aggressive efforts to address [financial] issues, our company filed a voluntary petition for reorganization,” said James Marcum, Circuit City’s acting CEO. “This filing will give us the time and resources to address our financial challenges while continuing to provide you, our guests, with consumer elect products and services you want for the holiday season.”
Circuit City has also asked the U.S. bankruptcy court in Virginia to grant it the authority to continue operations and move forward with its guest services, which includes accepting exchanges, returns and gift cards from customers. The company has also asked the court for approval to continue providing benefits and wages to its employees.
Also part of its bankruptcy effort is a request to negotiate a $1.1 billion debtor-in-possession revolving-credit facility to supplement its working capital in replacement of its $1.3 billion asset-based credit facility. This will help the company pay off vendors and partners for services received after the bankruptcy filing.
Poor Performance
Since early 2007, Circuit City has been moving in a downward spiral. Store closings began in February 2007, when the company shuttered dozens of stores in Canada as well as several domestic superstores. In the same month, Circuit City’s chief financial officer, Michael Foss, left the company. In March, the company announced that it would lay off 3,400 people.
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