Circuit City Facing Final Deadline

Circuit City Stores Inc. (Richmond, Va.) was authorized by bankruptcy court yesterday to sell some or all of its assets and a company spokesman warned that the nation's second-largest consumer electronics retailer could go out of business if a buyer does not emerge by the end of the week. The retailer said it is in negotiations with two potential buyers it would identify only as “two highly motivated and interested parties.”

The plan approved by the court would allow Circuit City to pay its creditors by selling the company or by auctioning its operations to bidders. The company's preference is to sell to someone who would keep the company intact and the brand alive, the spokesman said, but it's entirely possible that it would be broken up and sold bit by bit.

If no buyer is found by the end of the week, “then we would move to sell the inventory down and the company would be going out of business,” said the spokesman.

Circuit City closed 155 stores in the final months of 2008 in wake of its Chapter 11 bankruptcy protection filing, attributing its problems to the credit crunch. According to the Washington Post, company officials said 75 percent of the company's transactions are made on credit cards and, as a result, sales plummeted as consumers were no longer able to get credit or as they scaled back on their purchases. Declining sales hindered the company's ability to make inventory payments to vendors, who in turn tightened credit on Circuit City. As a result, the company was limited in buying merchandise to stock its shelves.