Down but not yet out, Circuit City has secured a whopping $1.1 billion in financing that will help keep the chain operational, at least for the immediate future. The loan, which comes from the same banks that backed Circuit City's $1.3 billion credit line, will be used to pay salaries and continue buying merchandise as the company restructures.
The loan gives the chain "another lease on life," Chris Horvers, an analyst with J.P. Morgan Securities Inc., wrote in a note to clients yesterday.
And a new lease is exactly what Circuit City needs. Debt has piled up as the electronics retailer owes $119 million to Hewlett-Packard and $116 million to Samsung Electronics Co. In its Chapter 11 petition, Circuit City indicated $3.4 billion in assets and $2.32 billion in debt.
Circuit City already announced plans to close 155 stores while also cutting up to 20 percent of its 43,000-employee workforce. Despite the new loan, that could be just the beginning. According to what Circuit City's lawyers told the judge, the company will likely shut down even more locations and attempt to find a buyer for a slimmed-down version of the chain.
Image Credit: Flickr Vicki & Chuck Rogers