Circuit City (CC) Is Weighing Broad Cuts As An Alternative To A Bankruptcy Filing
Today, the Wall Street Journal published a story that said Circuit City (NYSE: CC) is considering a plan to close at least 150 stores and cut thousands of jobs, as an alternative to filing for bankruptcy protection.
Earlier this month, Circuit City hired Skadden, Arps, Slate, Meagher & Flom LLP -- the law firm that oversaw the Chapter 11 reorganization of Kmart -- as its bankruptcy counsel, according to several people familiar with the matter.
In recent days, Circuit City has been analyzing how much monies it could raise by selling hundreds of millions of dollars in inventory.
Circuit City is trying to avoid a bankruptcy filing before the holiday season because it is nervous that customers might doubt the ability of a retailer involved in bankruptcy proceedings to provide people warranties and returns.
One out-of-court solution is closing at least 150 stores and the elimination of thousands of jobs. This would let Circuit City liquidate about $350 million in inventory, which it could use to pay off certain real-estate costs, such as leases on abandoned sites. It would then hope to press existing landlords to renegotiate leases, many of which Circuit City regards as overpriced.
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