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Ultimate Files Chapter 11, Cites ‘Significant Downturn’

Thornton, Colo. – Ultimate
Acquisition Partners, the parent company of the 46-store A/V and appliance
chain, has filed for Chapter 11 bankruptcy protection in Delaware.

In the filing, CEO
Bruce Giesbrecht said the action was prompted by “a significant downturn in
business” at some Ultimate Electronics locations and the refusal of certain
vendors to ship products on open credit.

The company, which
is 71 percent held by chairman Mark Wattles’ investment firm, Wattles Capital
Management, and 25 percent held by Hewlett-Packard, is seeking to use cash
collateral to continue day-to-day operations and pay its vendors.

Many of the
chain’s vendors have agreed to reopen their credit lines once their payables
are paid, Giesbrecht noted.

Top unsecured
creditors include New Age Electronics/Synnex ($5.5 million), Sony Electronics
($4.8 million), GE Money Bank ($3 million) and Monster ($2.3 million).

Manufacturers owed
between $1 million and $2 million include, in descending order, Klipsch,
Mitsubishi, Toshiba, Haier and Whirlpool.

The company has
accounts receivable of about $2 million, inventory valued at $98 million and
real estate holdings valued at $12.8 million. Liabilities are between $100
million and $500 million, court documents show.

This is the second
filing for Ultimate Electronics in six years. Wattles, the founder of Hollywood
Video and a dissident Circuit City shareholder, bought a controlling interest
in the chain in 2005, filed Chapter 11, and reacquired the business in a
bankruptcy auction later that year.

Since then Wattles
built the Colorado-based company out from 32 to 46 stores, including some in
distant markets in the Northeast, and added new categories to its core A/V mix,
including major appliances and billiard tables.

The chain ranks 29th
on the TWICE Top 100 CE Retailers roll, with $443 million in sales in 2009.