Circuit City’s Fate Hangs in Balance at Bankruptcy-Court Hearing
Circuit City’s fate perhaps will be known Friday when potential bidders for the chain’s assets are disclosed in bankruptcy court, said industry executives who are monitoring developments. But even the most optimistic among them are calling the company’s ability to survive questionable.
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Mexican businessman Ricardo Salinas Pliego and two groups that include liquidators are said to be in the running to buy the Richmond, Va.-based chain’s assets. Salinas has bought 28 percent of Circuit City since the chain filed for bankruptcy protection in November. One liquidators’ team is Hilco Merchant Resources, Great American Group and Hudson Capital Partners. The other is Gordon Bros. Retail Partners and Tiger Capital. An auction began Wednesday at the Skadden Arps Slate Meagher & Flom law firm in New York and was continuing at our deadline Thursday.
The auction results are scheduled to be announced at a hearing 10 a.m. Friday in U.S. Bankruptcy Court, Richmond. Circuit City will present Judge Kevin Huennekens the best deal it could secure, whether selling the chain as a whole or in pieces, we're told. Circuit City has said negotiations have centered on a “going concern” transaction, according to sources.
Even if a buyer is found for Circuit City, whether it could survive a year in the weak U.S. economy is a crap shoot, said executives we polled. It’s unclear how much the bidders are willing to pay for the beleaguered chain, considering a new owner would still face rough going.
Circuit City began the auction Tuesday, saying in a statement that it had two potential bidders that could keep the chain open. Last week, Circuit City warned that it would be forced to liquidate if it didn’t find a buyer by Jan. 16. The chain plunged into bankruptcy as vendors tightened credit terms. Earlier in the fall, Circuit moved to close 155 stores by leaving some markets, including Atlanta.
Circuit City landed a potential buyer Wednesday for its corporate jet in a separate auction of miscellaneous assets. Tacala, of Birmingham, Ala., which owns about 170 Taco Bell franchises in six states, put in a $100,000 refundable deposit for a 1996 Hawker 800XP, according to a purchase deal posted on Circuit City’s bankruptcy Web site. - Mark Seavy