17 Jan 2009

US electronics retailer to liquidate assets

9:47 am on 17 January 2009

Bankrupt electronics retailer Circuit City Stores said on Friday it will liquidate its assets and shutter hundreds of stores in the United States after failing to reach a deal to sell the company.

More than 30,000 employees are affected.

Bankruptcy Judge Kevin Huennekens approved the plan to sell Circuit City to a liquidator group, capping a tumultuous year for the specialty chain.

Circuit City is one of the largest retail bankruptcies in the current US recession and its demise paves the way for larger rival Best Buy to boost sales and gain clout with suppliers as the leading electronics retailer.

The No. 2 retail player in US electronics said it planned to begin liquidation on Saturday.

"Regrettably for the more than 30,000 employees of Circuit City and our loyal customers, we were unable to reach an agreement with our creditors and lenders to structure a going-concern transaction ... and so this is the only possible path for our company," vice-chairman James Marcum said.

Circuit City had indications of interest from private equity firm Golden Gate Capital and Mexican retail and media tycoon Ricardo Salinas Pliego, who owns more than 28% of the company, said Gregg Galardi, a bankruptcy lawyer representing Circuit City, in court on Friday.

An evaluation of bids for the company's Canadian unit is still under way, and the company may seek to sell its website, Mr Galardi said.

The company does not expect any value will remain from the bankruptcy estate for common shareholders. It has up to $US1.3 billion in inventory to liquidate.

Circuit City filed for Chapter 11 protection in November, citing a deteriorating cash position and tighter terms from vendors. It recently closed 155 stores, and now has about 567 US stores.

Filing for Chapter 11 protection allows a company to restructure while creditor claims are held at bay.