Richmond, Virginia-based Circuit City, the second biggest US consumer electronics retailer after Best Buy, has filed for bankruptcy under Chapter 11 protection. It is the largest US retailer to fall victim to the credit crisis, credit card spending accounting for 75% of its business.

“Despite aggressive efforts to secure vendor support, vendor concerns about the company's liquidity and ability to pay for its purchases in this difficult economic climate have escalated considerably since the company provided a liquidity update on November 3, 2008, further impairing the company's ability to conduct business and provide service to its customers,” says an official statement.

Along with other major stores, Circuit City’s decision last year to clear shelve space for Blu-ray equipment, put the final nail in the HD DVD coffin. While the disappearance of a giant outlet strikes a blow to sales of consumer electronics hardware and Blu-ray products in particular – whose backers are praying for a successfully Black Friday and holiday season boost in these less than favourable economic times – analysts reckon that the long-term impact will be minimal as others will eventually take over.

The 712-outlet, 40,000-employee company is closing 155 stores with immediate effect, leaving 567 stores to be sold later. Some 700 staff have lost their job at corporate headquarters in addition to the reductions resulting from the store closings. In all, 20% of the workforce has been laid off.

Circuit City's biggest unsecured creditors are Hewlett-Packard to which it owes $118.8 million; Samsung Electronics to which it owes $115.9 million; and Sony’s computer division, owed $60.01 million. It also owes the Paramount and Warner Bros. home video divisions more than $10 million each for unpaid DVDs.

Circuit City’s international operation includes 770 stores in Canada, where bankruptcy procedures have been set in motion as well. The company also operates websites at www.circuitcity.com, www.thesource.ca and www.firedog.com.

Circuit City has negotiated a commitment for a $1.1 billion debtor-in-possession (DIP) revolving credit facility to supplement its working capital. By replacing the company's $1.3 billion asset-based credit facility, DIP provides immediate liquidity while the company works to reorganise the business and pay vendors and other business partners for goods and services received after the filing.

Story filed 13.11.08