Circuit City (CC) Files Chapter 11

Circuit City Stores, Inc. (NYSE: CC) 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 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.

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.

As a further cost-saving measure, the company reduced its corporate headquarters workforce on November 7, 2008. These corporate, regional and district support reductions totaled approximately 700 positions and are in addition to the reductions resulting from the store closings. The store closings and support workforce reductions will result in a combined domestic workforce and store base reduction of approximately 20 percent.[SM]