Circuit City first-day motions approved; company granted interim access to $1.1 billion DIP loan

By Caroline Salls

Pittsburgh, Nov. 12 - Circuit City Stores, Inc. received approval of its first-day bankruptcy motions, including interim approval of its $1.1 billion of debtor-in-possession financing, according to a company news release.

The hearing on final approval of the DIP financing is scheduled for Dec. 5.

As previously reported, the DIP revolving credit facility will supplement the company's working capital and provide additional liquidity while it works to reorganize the business. Circuit City said the financing enables the company to pay vendors and other business partners for goods and services received after the bankruptcy filing.

The DIP lenders include Bank of America NA, GE Capital Markets, Inc. and Wells Fargo Retail Finance, LLC.

The DIP facility includes a $350 million sublimit for letters of credit.

Proceeds will be used to repay pre-bankruptcy debt, to finance the acquisition of working capital assets and to finance capital expenditures.

The facility will mature one year from closing, 45 days after interim approval if final approval has not been granted and on the effective date of a plan of reorganization.

Interest will be Libor plus 400 basis points.

Among other first-day motions, Circuit City was granted approval to continue to make wage and salary payments and continue various benefits for associates, as well as honor customer programs.

"These approvals will help position us for a more successful holiday selling season and allow us to operate our business and serve our valued guests without interruption as we work to emerge from Chapter 11 as quickly as possible," vice chairman and acting president and chief executive officer James A. Marcum said in the release.

In addition, Circuit City said the New York Stock Exchange has suspended the company's common stock effective immediately in light of the company's bankruptcy filing.

The company said it also was not in compliance with the NYSE's price criteria for common stock because the average closing price of the company's common stock was less than $1.00 per share over a consecutive 30-trading-day period as of Oct. 22.

According to the release, Circuit City's common stock is trading over the counter and is being quoted on the Pink Sheets service under the ticker symbol CCTYQ.

The company said it does not intend to appeal the NYSE's decision, and therefore the common stock is expected to be delisted after the completion of the stock exchange's application to the Securities and Exchange Commission.

Circuit City, a Richmond, Va., electronics retailer, filed for bankruptcy on Nov. 10 in the U.S. Bankruptcy Court for the Eastern District of Virginia. Its Chapter 11 case number is 08-35653.

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