Circle K Files for Chapter 11 Protection : Retailing: The giant chain of convenience stores was hurt by competition and interest expenses from costly buyouts.

Circle K, the nation’s second-biggest chain of convenience stores, announced late Tuesday night that it filed for protection from creditors under Chapter 11 of the U.S. Bankruptcy Code.

The announcement marks another in a series of recent collapses by major U.S. retailers. Earlier this year, Campeau Corp.’s U.S. department store divisions and Ames Department Stores, a major discounter, sought bankruptcy court protection.

As in the other cases, Circle K was brought down by interest expenses stemming from costly buyouts. Mainly through a series of acquisitions, Phoenix-based Circle K grew from a chain of about 1,200 stores in 1983 to its current 4,600 outlets in the United States, along with 1,386 jointly owned or licensed stores in 13 foreign countries.

Circle K also has been hurt by intensified competition in the convenience store business. In recent years, oil companies have opened thousands of convenience stores and supermarkets have extended their hours in a bid for the same customers.

Southland Corp.--parent of 7-Eleven, the nation’s biggest chain of convenience stores--signaled earlier this year that it also might be forced to file for Chapter 11 protection if it fails to secure a major cash infusion from a buyer or partner.

Circle K made its Chapter 11 filing Tuesday evening in Phoenix. In an interview, company President Robert A. Dearth Jr. said the action was prompted by an impasse in Circle K’s negotiations with its banks and other creditors.

The company had been negotiating a definitive agreement for a moratorium on its debt payments until Oct. 31 to give it time to overhaul the company financially.

Dearth said, however, that the company “reached a point of difference with the banks in that process that we were unable to overcome.” He declined to elaborate other than to say the banks insisted on a schedule for the financial overhaul that was unacceptable to the other parties.

The Circle K president said the company now is trying to improve its stores’ operations by making sure that goods are sold at “competitive price levels.” He said recent efforts already have halted the losses in its market share.

In a news release, Circle K said its “daily operations would continue as usual and its stores would remain open, with a selection of goods and services as before.” Under Chapter 11, companies are given time to reorganize their finances shielded from the threat of creditors’ lawsuits.

The release also said that the company “will be contacting each of its key vendors immediately to seek their cooperation.”

Dearth took the reins at Circle K just last week after the resignation of Karl Eller, the hard-charging businessman who led the company on its acquisition spree. Analysts said Eller’s departure apparently came at the request of the firm’s lenders or Carl H. Lindner, the Cincinnati investor who is Circle K’s biggest shareholder.

For a time, Circle K prospered, with earnings hitting $60.4 million in its fiscal 1988. As Circle K’s debt climbed to its current $1.2 billion, however, the company’s profit fell 74% last year and an attempt to arrange a buyout failed.

During the nine months ended Jan. 31, Circle K reported a loss of $25.5 million on sales of $2.8 billion.

Circle K has 605 stores in California, including roughly 130 in Los Angeles and Orange counties.