Circuit City files for bankruptcy

[Neil D]

NEW YORK (Reuters) - Circuit City Stores Inc, the No. 2 U.S. consumer electronics retailer, filed for bankruptcy protection on Monday just a few weeks before the start of the key holiday shopping season, becoming the largest retailer to file under Chapter 11 this year.

Circuit City fell victim to tighter credit terms from vendors and a loss of market share to Best Buy Co, Wal-Mart Stores Inc and other rivals.

The retailer and 17 affiliates filed for Chapter 11 protection from creditors with the U.S. bankruptcy court in Richmond, Virginia, where it is based.

Circuit City filed one week after saying it would close 155 stores, or more than one-fifth of its retail base, and eliminate 17 percent of its U.S. workforce. It also said it was considering all options to restructure.

In a court filing on Monday, Chief Financial Officer Bruce Besanko said the retailer filed for Chapter 11 in order to continue its turnaround efforts.

"In large part, a Chapter 11 filing is due to three factors, all of which contributed to a liquidity crisis that prevented the company from completing its turnaround goals outside of formal proceedings: erosion of vendor confidence, decreased liquidity and a global economic crisis," Besanko said.

PINCHED SUPPLIERS

Circuit City had lost money in five of the last six quarters. In recent weeks, suppliers pinched by the global credit crunch have tightened terms, sometimes requiring up-front payments before shipping goods.

Larger rival Best Buy, which is based in Minneapolis, has said it might take over stores that distressed rivals close.

Yet a flood of discounted merchandise from liquidating Circuit City stores could hurt Best Buy during this holiday shopping season, said Jefferies & Co analyst Dan Binder.

"Longer term, you've got Best Buy, who's dominant in the sector, taking share. But in the short run it could feel the pain of the liquidation activity," Binder said.

"There's already soft demand out there and probably too much supply. This exacerbates the situation," he added.

According to the filing, Circuit City had $3.4 billion of assets and $2.32 billion of debt as of August 31, and more than 100,000 creditors.

The company has arranged a commitment for debtor-in-possession financing of $1.1 billion, which will allow it to continue to operate during the bankruptcy proceeding.

Among the company's largest unsecured creditors are Hewlett-Packard Co, Samsung Electronics Co and Sony Corp, the filing shows. The largest shareholders include HBK Master Fund LP and First Pacific Advisors LLC, according to the filing.

Shares of Circuit City last traded Friday at 25 cents, New York Stock Exchange data shows. They fell to 13 cents in premarket trading.

(Reporting by Jonathan Stempel and Martinne Geller; Editing by Steve Orlofsky and Brian Moss)

[Woody]

Good Riddens.

Last year I tried to make a claim on an extended warrenty I bought from them. They said ... no they no longer wanted to honor the extended warrenties that they sold. They would return the cost of the warrenty that I paid. But would no longer service the warrenty.

I didn't want my money back. I wanted the warrenty and the service.

Why do I have so much problems with companies ... I just don't know.

Neil ... have you been sending those gremlins out after me?

[phkrause]

I never was a fan of CC. I always compared them to BB and they always came out on the losing side. I don't know if you remember Lechmere, now they were twice the store compared to BB or CC. So no big lose as far as I'm concerned.

pk

[Neil D]

Good Riddens.

Last year I tried to make a claim on an extended warrenty I bought from them. They said ... no they no longer wanted to honor the extended warrenties that they sold. They would return the cost of the warrenty that I paid. But would no longer service the warrenty.

I didn't want my money back. I wanted the warrenty and the service.

Why do I have so much problems with companies ... I just don't know.

Neil ... have you been sending those gremlins out after me?

I am sorry for your troubles, Redwood. I have no control over the gremlins, as they are oppertunists and take advantage over every situation. Lots of prayer is what is needed....and a repudiation of Republican oversight laws.

As it is, the republicans who voted out deregulations, have also taken out the honoring of those 'warrentys' ...I suggest contacting your local republican senator or representative and ask HIM why he voted to not honor the warrentees of your purchases and why these unethical merchants are stealing your money....

[Woody]

Is everything the fault of the Republicans? Geeez

[Liz]

I never shopped there either, price-wise Best Buy could always beat them. But I do feel bad that people will be losing their jobs.

[Neil D]

Is everything the fault of the Republicans? Geeez

I never said that....It was the republican agenda to deregulate certain rules in the business industry. The result is after you purchased a warrenty, merchants are not honor bound to honor it. Look to your current financial mess...[ok, the last sentence is a shameless jab at the republicans....but it upset you nevertheless, didn't it. heheheheheh]

[Woody]

All I know is that now Obama is going to be Prez ... the market is falling. He is bad news. Now the auto business is asking for our money. And Obama is wanting us to give it to them. What next ?

[Neil D]

Hey, Bush is a lame duck president. He can do anything now...

...go talk to him and get the economy going before he leaves office....