Ahead of the Bell: Circuit City bankruptcy hearing

RICHMOND, Va. - Circuit City Stores Inc. heads into U.S. Bankruptcy Court for a hearing on Friday to seek final approval on motion to allow the company to continue operating during the process, and the important holiday shopping season.

The nation's second-biggest electronics retailer filed for Chapter 11 bankruptcy protection last month as it faced pressure from vendors and consumers who aren't spending.

Circuit City, which has posted losses for seven of the last eight quarters, plans to keep operating while it develops a reorganization plan to deal with significant declines in traffic and heightened competition from rival Best Buy Co. and others.

At a hearing in Richmond last month, U.S. Bankruptcy Judge Kevin Huennekens granted Circuit City interim approval to secure $1.1 billion in debtor-in-possession loans while it is in bankruptcy protection. Those funds, needed to stock merchandise and pay employees, replace a $1.3 billion asset-backed loan the company had been using.

Circuit City also was granted interim approval to abandon 150 leases at locations where it no longer operates stores, which it said costs $40 million annually.

The company, which said it had $3.4 billion in assets and $2.32 billion in liabilities as of Aug. 31, is hoping to exit court protection by early summer 2009, putting it in a position to find a buyer for the chain or operate as a standalone business.

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