Circuit City Stores - Bankruptcy and Liquidation

Bankruptcy and Liquidation

On November 4, 2008, Circuit City announced that it would close 155 stores and lay off 17% of its workforce by the end of the year as a result of continuing difficulties in remaining profitable. On November 7, 2008, Circuit City laid off between 500 and 800 corporate employees from its Richmond, Virginia headquarters. The approximately 1000 remaining corporate employees were consolidated into one building in an effort to further reduce costs and improve profitability. On November 10, 2008, Circuit City filed for bankruptcy protection under Chapter 11 of the United States Bankruptcy Code. At that time, Circuit City's stock prices traded well below $1 per share, and were removed from listing on the New York Stock Exchange.

In bankruptcy court, Circuit City was approved to borrow $1.6 billion to finance operations while restructuring. Court filings revealed that the company had assets of $3.4 billion and debt of $2.32 billion, including a $119 million debt to Hewlett-Packard and a $116 million debt to Samsung Electronics. Chief executive James A. Marcum promised that the stores would stay open and the chain would not be liquidated.

On November 18, 2008, it was announced that Ricardo Salinas Pliego, current owner of Mexican television broadcaster TV Azteca, had purchased 28 percent of Circuit City.

On January 10, 2009, it was announced by a company spokesman that Circuit City needed a buyer by January 16, 2009 to keep from shutting its doors due to an approaching deadline set by the court and creditors. Although two unnamed parties were interested in buying out Circuit City, a bidder could not be found, so Circuit City, with bankruptcy court approval, converted its Chapter 11 bankruptcy to Chapter 7, and started airing "going out of business" commercials, as they started closing all of their stores. The Canadian operations, which were run under The Source by Circuit City banner, were not initially affected by the liquidation, but were later sold to Bell Canada.

According to Circuit City's website, the company announced on January 16, 2009 that it intended to close all of its stores. Reportedly, over 30,000 employees lost jobs in the liquidation, as well as 45% of Verizon's Circuit City sales force being laid off with the remainder resigning or transferring to other Verizon locations.

The final day of operations for all Circuit City stores was March 8, 2009. Besides retail auto dealerships, Circuit City closed more retail locations in the U.S. than any other retail chain in 2009. Circuit City selected Great American Group LLC, Hudson Capital Partners LLC, SB Capital Group LLC, and Tiger Capital Group LLC to handle the liquidation of all stores nationwide.

After the final date of operation for all Circuit City stores, the company's online store was replaced with a page that read as follows:

Circuit City would like to thank the millions of customers who have shopped with us during the past 60 years. Unfortunately, we announced on January 16, 2009, that we are going out of business.