Richmond, Va. — Circuit City said it is negotiating the sale of the company with two “highly motivated and interested parties” who may acquire it outright, buy only parcels of the business, or provide additional financing to support the chain while it restructures.
Short of the sale or an amended credit agreement with its current lenders, Circuit City will begin auctioning off its assets on Jan. 13, and would completely liquidate the business shortly thereafter should the auction fail to generate a sale.
The unnamed investors have substantially completed due diligence and now are in negotiations with Circuit City and its major stakeholders to finalize a transaction, the company said. The identities of the parties are expected to be revealed later today when a motion to sell the business is unsealed in the United States Bankruptcy Court here. The parties could include Mexican billionaire Ricardo Salinas Pliego, a banking, broadcasting and retail tycoon who became the company’s largest shareholder last November after buying up 28.1 percent of Circuit City stock for $41.4 million.
Circuit City said it is optimistic that a transaction can be finalized.
In court papers, the company said that poor holiday sales and the resulting cash-in-advance terms from key vendors have reduced the value of the company’s collateral, which would make a renewal of its credit agreement unlikely and “strangle” its ability to operate. The credit agreement ends on Jan. 16.
Circuit City described the macro-economic conditions facing retailers as “among the worst in history” and said “sluggish” liquidation sales at its 155 newly shuttered stores provided less liquidity than expected. However, company sales trends did improve “significantly” during the last two weeks of December, court documents show.
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