Circuit City Stores Inc. said Friday it is in talks with two parties that could buy the company or provide additional financing for it to stay in business.
Circuit City, the nation's second-largest electronics retailer after Best Buy Co., filed for Chapter 11 bankruptcy protection in November as it faced pressure from vendors, heightened competition and waning consumer spending. Its Canadian operations filed for similar protection.
The Richmond, Va.-based company on Monday filed a motion under seal with the U.S. Bankruptcy Court seeking approval for its sale as a going concern, either as separate units or as individual assets. An expedited hearing is scheduled Friday afternoon.
Circuit City said Friday the "highly motivated and interested parties" it is talking with, which it did not name, are considering providing additional financing to allow the company to sustain operations and restructure. The parties have substantially completed due diligence, the company said.
Circuit City has been exploring strategic alternatives since May, when it opened its books to Blockbuster Inc. The Dallas-based movie-rental chain made a takeover bid of more than $1 billion with plans to create a 9,300-store chain to sell electronic gadgets and rent movies and games. Blockbuster withdrew the bid in July because of market conditions.
Circuit City said the current talks could result in a sale, or the company and its lenders could amend its debtor-in-possession credit agreement before a Jan. 16 sale hearing. An auction of the company and its assets would take place Jan. 13.
"While the company is optimistic that a transaction can be successfully finalized, no assurance can be given that this will occur," the company said in a statement.
If no deal is finalized, Friday's motion seeks permission for the company to liquidate its assets.
The company said that, as planned, it closed 155 stores in the U.S. in November and December that were not performing well or were "no longer a strategic fit." In the motion, it said store-closing sales were "sluggish" and did not generate the "liquidity infusion" it projected.
It also said that, while sales improved significantly during the last two weeks of December, overall revenue has been below projections. But the company said it has managed expenses and improved gross margins. Many vendors also continue to provide merchandise to Circuit City under strict conditions, the company said.
Circuit City, which has posted losses for seven of the last eight quarters, operates more than 565 stores in the U.S. and 765 retail stores and dealer outlets in Canada.
The company, which said it had $3.4 billion in assets and $2.32 billion in liabilities as of Aug. 31, said in its initial filings that it planned to emerge from court protection in the first half of this year.
Mexican billionaire Ricardo Salinas Pliego, who controls a chain of electronics stores in Latin America, revealed in November that he holds a 28 percent stake in Circuit City. A spokesman said at the time that Salinas believed there is great market opportunity in Circuit City and that he was conducting a detailed analysis of the company.
A spokesman for Salinas did not immediately provide comment on Friday.
Salinas and his family have been involved in the retail industry for the last 100 years, Nino de Rivera said. Among Salinas' businesses is Grupo Elektra, which operates more than 1,000 stores that sell electronics, furniture and appliances.