Circuit City files for Chapter 11 protection, will stay open

NEW YORK -- It filed under Chapter 11 of the bankruptcy code, which will allow it to hold off creditors and continue operations while it develops a reorganization plan.

The company, based in Richmond, Va., has been struggling as nervous consumers spend less and credit has become tighter, and the retail industry overall is facing what's expected to be the weakest holiday season in decades.

Circuit City also said it would cut 700 more jobs, after announcing a week ago that it would close 20% of its stores and lay off thousands of workers.

"This isn't a surprise," JPMorgan analyst Christopher Horvers said, adding that the reorganization could help the company get out of leases for certain bad store locations.

"At the end of the day I think it's really about an inventory position," Horvers said. "If they can get inventory into the stores, I can think they'll remain competitive."

He added, "I think it's encouraging that they were able to secure financing."

Circuit City said it had lined up $1.1 billion in loans to provide working capital while it is in bankruptcy protection. That replaces a $1.3 billion asset-backed loan it had been using.

The company said in its filing that it had $3.4 billion in assets and $2.32 billion in liabilities, as of Aug. 31.

Circuit City Stores announced a week ago it planned to close 155 of its more than 700 U.S. stores by Dec. 31. The stores are spread throughout 28 states, including multiple locations in areas like Phoenix and Atlanta. It is laying off about 17% of its domestic workforce, which could affect up to 7,300 people.