Judge approves Circuit City liquidation plan

Friday, Jan. 16, 2009 1:44 PM
Last updated 3:01 PM
  • Follow Latest News

NEW YORK — A bankruptcy judge says Circuit City Stores Inc. can liquidate its remaining 567 U.S. stores.

Circuit City needed approval from U.S. Bankruptcy Judge Kevin Huennekens to begin to put itself out of business. It sought a buyout deal, but one could not be reached.

The nation's second-biggest consumer electronics retailer says it will lay off more than 30,000 workers and begin close-out sales on Saturday.

Richmond, Va.-based Circuit City filed for Chapter 11 protection in November.

Its Canadian unit is still negotiating for a possible takeover.

The nation's second-biggest consumer electronics retailer is the latest casualty of an unprecedented pullback in consumer spending that has driven other brands such as KB Toys, Mervyns LLC and Linens 'N Things into bankruptcy. Experts believe there will be more to come.

"This is the only possible path for our company," Circuit City's acting Chief Executive James A. Marcum said in a statement. "We are extremely disappointed by this outcome."

The company had been seeking a buyer or a deal to refinance its debt, but the hobbled credit market and consumer worries proved insurmountable. Negotiations for an acquisition went past midnight on Thursday, a Circuit City lawyer said in court.

Two buyers — Mexican billionaire Ricardo Salinas Pliego, who controls a chain of electronics stores in Latin America, and the Golden Gate Capital private equity firm — had been looking to buy the company in a shrunken form, with either 350 stores or as few as 180 stores. But the company couldn't secure the necessary financing or support from vendors.

Employees were being notified Friday that they would lose their jobs and, if a judge gives final approval to the liquidation, stores would begin the closing process as early as Saturday.

"Regrettably for the more than 30,000 employees of Circuit City and our loyal customers, we were unable to reach an agreement with our creditors and lenders," Marcum said.

Shareholders are likely to receive nothing, as is typical in bankruptcy cases. Circuit City said in court papers it has appointed Great American Group LLC, Hudson Capital Partners LLC, SB Capital Group LLC and Tiger Capital Group LLC as liquidators. They provide for 70.5 percent return on merchandise.

It was unclear what would happen to the company's 765 retail stores and dealer outlets in Canada. Circuit City lawyer Gregg Galardi of Skadden, Arps, Slate, Meagher & Flom LLP told a judge there are still bids for the Canadian business.

"Very, very sad," said Alan L. Wurtzel, the son of company founder Samuel S. Wurtzel, and the chief executive from 1972 to 1986, board chairman from 1986 to 1994 and vice chairman until 2001. "I feel particularly badly for the people are employed or until recently were employed."

Wurtzel has previously said Circuit City didn't take the threat of rival Best Buy Co. seriously enough and, at some points, were too focused on making a profit in the short term instead of building long-term value.

Credit Suisse analyst Gary Balter told investors that Circuit City's demise will help Best Buy cement its position as the market leader.

"Losing Circuit (City) and what had previously been an $11 billion business, in addition to share gains from other smaller outlets, should help to partially offset weaker consumer spending as well as further secure Best Buy's position as the leader in the space," he said.

The liquidation of Circuit City follows the worst holiday shopping season in four decades. People have slashed their spending since the financial meltdown in September as they worry about their job security and declining retirement funds.

KB Toys filed for bankruptcy in December and is liquidating stores. Department store chains Goody's Family Clothing and Gottschalks Inc. both filed for bankruptcy this week — Goody's plans to liquidate, while Gottschalks hopes to reorganize. Industry experts expect more bad news in the coming months as spending likely will deteriorate further.

The Circuit City move will also hurt the nation's malls, which have suffered from the rise in vacancies as other chains have liquidated. But analysts say that the demise of Circuit City, whose stores range in size from 20,000 to 25,000 square feet, will hurt the fortunes of mall operators even more.

"It will bring to market a glut of big box spaces across the country," said John Bemis, head of Jones Lang LaSalle Inc.'s retail leasing team. "It will have one of the largest impacts on big box real estate across the country."

Circuit City filed for Chapter 11 in November as vendors started to restrict the flow of merchandise ahead of the busy holiday shopping season. It had been exploring its options since May, when it opened its books to Blockbuster Inc. The Dallas-based movie-rental chain made a takeover bid of more than $1 billion with plans to create a chain to sell electronic gadgets and rent movies and games. Blockbuster withdrew the bid in July.

Circuit City, which said it had $3.4 billion in assets and $2.32 billion in liabilities as of Aug. 31, said in its initial filings that it planned to emerge from court protection in the first half of this year.

Under court protection, it broke 150 leases at locations where it no longer operates stores and closed 155 stores in the U.S. in November and December. But it also got permission from U.S. Bankruptcy Judge Kevin Huennekens to liquidate if the company could not find a buyer.

Comments (14)

Add comment
ADVISORY: Users are solely responsible for opinions they post here and for following agreed-upon rules of civility. Posts and comments do not reflect the views of this site. Posts and comments are automatically checked for inappropriate language, but readers might find some comments offensive or inaccurate. If you believe a comment violates our rules, click the "Flag as offensive" link below the comment.
jhuran
0
Points
jhuran 01/16/09 - 02:52 pm
0
0

Now,this hurts!How about some

Now,this hurts!How about some of that bail out money?In order to get out of this hole we`re in, we must keep people in this income class working.

Captain Awesome
0
Points
Captain Awesome 01/16/09 - 02:56 pm
0
0

Fantastic, another empty big

Fantastic, another empty big store in the area.

Can somebody turn it into something useful? Like a brewery?

mover5
0
Points
mover5 01/16/09 - 02:58 pm
0
0

mmmmm. BEER!!!!!!

mmmmm. BEER!!!!!!

iletuknow
7
Points
iletuknow 01/16/09 - 05:02 pm
0
0

Paid the price for having

Paid the price for having unknowledgable sales staff bent on service contracts on items that were cheaper elsewhere.

LadyCisback
4
Points
LadyCisback 01/16/09 - 05:11 pm
0
0

It's all coming to an end..

It's all coming to an end..

jasonpilgrim
0
Points
jasonpilgrim 01/16/09 - 05:14 pm
0
0

i don't agree w/ you

i don't agree w/ you iletuknow circuit city had some of the most tech. savy staff in augusta. i was helped there many times by purely professional "salesmen and women". I was willing to pay a little more for superior service. This is very sad news to me.

Bobbie S.K
0
Points
Bobbie S.K 01/16/09 - 05:17 pm
0
0

We need a grocery in that

We need a grocery in that area! For myself, the old Winn-Dixie, where the hhgregg is, was very convenient.

Signal Always
3
Points
Signal Always 01/16/09 - 05:39 pm
0
0

amazon.com, newegg.com,

amazon.com, newegg.com, buy.com, overstock.com, tigerdirect.com, ....I think we'll survive. Although, I will miss it. It beats Best Buy's prices hands down.

gemini62882
0
Points
gemini62882 01/16/09 - 05:55 pm
0
0

Is the Circuit City store in

Is the Circuit City store in Augusta closing?

Signal Always
3
Points
Signal Always 01/16/09 - 06:44 pm
0
0

Yes.

Yes.

Fredtmccoyjr
0
Points
Fredtmccoyjr 01/16/09 - 09:33 pm
0
0

http://chronicle.augusta.com/

http://chronicle.augusta.com/stories/050308/let_197487.shtml

That is a link to a letter to the editor I posted back in May 08. Circuit city's closing is making us lose jobs in our area. Were not losing electronics, were losing consumers. Personally, I dont see why someone local doesn't buy the local store and see about running it as some sort of "big lots" or "Freds" or even a discount PC outlet, or a pc service center. The place already has the technicians, and some computers in stock. Just because the chain is going down, it doesnt mean the store cannot be resurrected itself. There is no reason why someone cannot buy and operate that local store and allow some of the staff to keep their jobs. If push comes to shove, allow internet servers to be hosted there. It is a good location for broadband services. Plus, some of the current staff can operate and maintain the servers, while still operating the store front as a pc service center. it's so sad that good people will be losing their jobs through no fault of their own.

Bobbie S.K
0
Points
Bobbie S.K 01/17/09 - 12:54 pm
0
0

That all sounds great but do

That all sounds great but do you think an "everyday" business man/woman could afford the rent in the huge box. You apparently have no clue. You would run a mom and pop store to the ground.

user7
0
Points
user7 01/17/09 - 01:53 pm
0
0

We are responsible for all

We are responsible for all the closings the media has every one so scared of the economy!!!!!!!! geaz people get out there and shop!!! This too shall pass!!!!

JohnQPublic
5
Points
JohnQPublic 01/17/09 - 02:18 pm
0
0

Companies cannot get credit

Companies cannot get credit to buy more and pay employees. Combine that with skiddish consumers who are not spending as usual and that's why stores are closing.

Back to Top

Loading...