Circuit City has filed for Chapter 11 bankruptcy protection, but the firm has promised to continue trading over the Christmas period with the assistance of a $1.1 billion debtor-in-possession revolving credit facility.
The credit, which is being provided by the retaliler’s current lenders, will allow the firm to pay off current creditors while the firm re-organises.
It has also seed customary authority in order to be able to continue paying wages and supplying other employee benefits. If granted, it will mean it can continue to honour existing customer programmes such as returns, exchanges and gift cards.
Making the announced, vice chairman and acting president and chief executive of Circuit City, James Marcum said: "We recently have taken intensive measures to overcome our deteriorating liquidity position.
"The decision to restructure the business through a Chapter 11 filing should provide us with the opportunity to strengthen our balance sheet, create a more efficient expense structure and ultimately position the company to compete more effectively."
Marcum was keen to stress that the company wanted to avoid this at all costs: "We understand how difficult the recent announcements have been on everyone at the company, and we recognize the changes personally affect many people. Further, we know there is never a good time for individuals to be impacted by decisions like these, and we deeply regret the effect this has on our associates."