Circle K May Ask Bankruptcy Protection : Retailing: The convenience store chain reported a loss on falling sales. The company’s debt totals $1.3 billion.
Given current business conditions, Circle K Corp. may not be able to complete its restructuring without the protection of bankruptcy laws, the convenience store chain said.
Circle K also reported a loss for the fiscal third quarter ended Jan. 31 of $28.1 million on revenue of $872.5 million, contrasted with a profit of $12.8 million on revenue of $895.2 million a year earlier. The year-ago earnings included a $14.4-million gain on the sale of certain operations.
“If the company does not achieve a financial restructuring, it will not have adequate liquidity,” according to the company, which is staggering under the weight of $1.3 billion in debt.
Circle K blamed a sales slump for its precarious position and acknowledged that its prices had been too high. The company said it would begin cutting prices at its stores in an effort to win back customers.
The Phoenix company accumulated its debt during a period of explosive expansion as it grew from about 1,000 stores in 1984 to 4,685 in 33 states in the South, West and New England, just before it announced a restructuring last year. In addition, the firm licenses an additional 1,250 stores in 11 foreign countries operating under the Circle K name.
It has been trying to obtain short-term debt relief while negotiating to sell 375 stores in the Pacific Northwest or Hawaii.
The four-page statement said Circle K continues to believe that a negotiated restructuring is possible. However, the negotiation of the financial restructuring involves tricky manipulation of deadlines, it said.
“Some of the deadlines and demands will be difficult to meet and will require extension or modification. If any deadline is not met or extended or any unsatisfied demand is not satisfactorily altered, an impasse could result which might prevent completion of the negotiated restructuring,” Circle K said.
Southland Corp., the nation’s largest convenience store chain with more than 7,000 units under the 7-Eleven banner, announced Thursday that it was selling out to a Japanese company that had joined it as a partner in a leveraged buyout.
Circle K’s statement indicated that a Chapter 11 bankruptcy filing--allowing federal protection during reorganization--was more likely. It also said Circle K had hired Merrill Lynch Capital Markets, a unit of the Wall Street firm, to help work out its financial problems.
Robert Dearth Jr., hired as Circle K president in January, has proposed a three-point business plan to improve the company’s financial position.
The plan includes a price cutback, improved services and product features and an improved mix of merchandise targeted to the needs of neighborhoods where the stores are located.
