Friday, January 9, 2009

Circuit City Stores, Inc. Provides Update

/PRNewswire/ -- Circuit City Stores, Inc. today provided an update on developments in its United States Bankruptcy Court proceedings, its restructuring activities and its operations.

On January 5, 2009, the company filed a motion with the Bankruptcy Court that seeks approval of procedures that would formally put the company up for sale, as a going concern, as separate business units or as individual assets - including the sale of inventory.

Presently, the company is engaged in significant discussions, meetings and negotiations with two highly motivated and interested parties concerning the terms of a going concern transaction. These interested parties are considering providing additional financing to allow the company to sustain operations and move forward with a subsequent restructuring through a stand-alone plan and/or purchasing the company or all or substantially all of the company's assets. The parties have substantially completed due diligence and now are in negotiations with the company and the company's major stakeholders in order to finalize such a transaction. While the company is optimistic that a transaction can be successfully finalized, no assurance can be given that this will occur.

The motion was originally filed under seal and is being "unsealed," or made public, by the Bankruptcy Court today in order to conduct a hearing on the motion on Friday, January 9, 2009. The company was required to file the motion pursuant to an amendment to the company's debtor-in-possession (DIP) credit agreement, which was approved under seal by the Bankruptcy Court on December 23, 2008. The motion currently provides that an auction of the company and its assets would commence on January 13, 2009, and a sale hearing would occur on January 16, 2009.

The company's discussions with the interested parties could result in a sale agreement, or the company and the lenders could further amend the DIP credit agreement prior to the January 16, 2009, sale hearing. If no agreement is approved with a party interested in a going concern transaction by January 16, 2009, and the auction does not result in a sale of the company's assets, the motion provides that the company may enter into a transaction that will result in an asset liquidation process commencing soon after the sale hearing scheduled for January 16, 2009, absent any further amendment to the DIP credit agreement deadlines.

Restructuring and Operations Update

The company has continued to operate its business without interruption, and management is focused on developing and executing a comprehensive corporate restructuring plan. Initial successes toward restructuring the company's business and operations include the following:

-- As planned, in the months of November and December, the company
completed liquidation sales in and subsequently closed 155 domestic
stores that were underperforming or were no longer a strategic fit for
the company.
-- The company has achieved significant selling, general and
administrative expense reductions as it restructures it business to
align operations with its smaller national store base and has
implemented more stringent expense controls.
-- The company has retained DJM Realty Services, Inc. to negotiate
reduced rent for leased properties and to sell owned properties.
-- The company's sales trends improved significantly during the last two
weeks of December, and the combination of the improvement in sales and
focus on gross margin has enabled the company to continue to operate
well within the operating budget required by the amended DIP credit

The case number for Circuit City's Chapter 11 filing in the United States Bankruptcy Court for the Eastern District of Virginia is 08-35653. Additional information on the filing can be found by visiting the company's investor information home page at and clicking on "Breaking News" and at the Claims Agent's Web site at

Forward-Looking Statements

Statements made in this release may be considered forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and are subject to risks and uncertainties. These forward-looking statements include, without limitation, statements regarding the company's expectations concerning the bankruptcy process and the company's restructuring activities and operations. Actual results may differ materially from those included in the forward-looking statements due to a number of factors, including, without limitation, the following: (1) the impact of today's announcement on the company's restructuring activities and operations; (2) the ability of the company to continue as a going concern; (3) the ability of the company to negotiate successfully with one or more interested parties for a sale of all or substantially all of the company's assets; (4) the nature and amounts of the bids in any auction for the sale of all or substantially all of the company's assets; (5) the ability of the company to obtain approval of any necessary modifications to the DIP credit facility and operate pursuant to the terms of that facility; (6) the ability of the company to obtain Court approval of motions pursued by it from time to time in the Chapter 11 proceeding, including motions to extend deadlines currently in place in the bankruptcy proceeding; (7) the ability of the company to develop, pursue, confirm and consummate one or more plans of reorganization with respect to the Chapter 11 proceeding; (8) risks associated with third parties seeking and obtaining Court approval to propose and confirm one or more plans of reorganization, for the appointment of a Chapter 11 trustee or to convert the proceeding to a Chapter 7 proceeding; (9) the ability of the company to obtain and maintain normal terms with vendors and service providers; (10) the ability of the company to maintain contracts that are critical to its operations; (11) potential adverse developments with respect to the company's liquidity or results of operations; (12) the ability of the company to fund and execute its business plan; (13) the ability of the company to attract and retain customers; and (14) any further deterioration in the macroeconomic environment or consumer confidence. Discussion of additional factors that could cause actual results to differ materially from management's projections, forecasts, estimates and expectations is set forth under Management's Discussion and Analysis of Results of Operations and Financial Condition in the Circuit City Stores, Inc. annual report on Form 10-K for the fiscal year ended February 29, 2008, the quarterly report on Form 10-Q for the fiscal quarter ended August 31, 2008, and in the company's other SEC filings. A copy of the annual report is available on the company's investor information Web site at

Fayette Front Page
Georgia Front Page

No comments: