- Circuit City Remains Fully Operational and Open for Business -
- Company Has Negotiated a Commitment for $1.1 Billion in Debtor-in-Possession Financing -
- Company Intends to Build on Recent Efforts to Streamline the Company and Create a Stronger, More Competitive Business -
RICHMOND, Va., Nov. 10 /PRNewswire-FirstCall/ -- Circuit City Stores, Inc.
(NYSE: CC) today announced that it has filed a voluntary petition for
reorganization relief under Chapter 11 of the United States Bankruptcy Code in
the United States Bankruptcy Court for the Eastern District of Virginia
('Bankruptcy Court') in Richmond, Va. The company 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 under the Companies'
Creditors Arrangement Act in Canada ('CCAA').
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.
Circuit City recently announced that it was taking certain actions to
address the company's financial condition and deteriorating liquidity
position. Despite aggressive efforts to secure vendor support, vendor
concerns about the company's liquidity and ability to pay for its purchases in
this difficult economic climate have escalated considerably since the company
provided a liquidity update on November 3, 2008, further impairing the
company's ability to conduct business and provide service to its customers.
Faced with the need to secure ongoing vendor support and to ensure adequate
merchandise flow to stores during the important holiday season, the company
has determined that it would be in the best interest of its stakeholders to
file for reorganization relief under Chapter 11. Operating under the
protection of Chapter 11 will provide the company's vendors with assurances
that they will be paid for merchandise the company receives post-filing so the
company can be sufficiently stocked for the holiday selling season. Further,
the company intends to create a restructuring plan that should allow Circuit
City to emerge as a stronger business with an improved national distribution
channel for its vendors and a more compelling offering for its customers.
The company recognizes that, to achieve these objectives, there is a
critical need to create a more efficient chain with a streamlined cost
structure. As previously announced, the company is in the process of closing
155 domestic segment stores.
