Clock ticking for Circuit City's survival
Bankrupt electronics seller says it has until next week to reach deal with 'potential' buyers for its business or else it may have to start liquidating.
NEW YORK (CNNMoney.com) -- Troubled retailer Circuit City said Friday that it has until the end of next week to reach a deal with "interested" parties to help it stay in business or else it may have to start liquidating.
"Circuit City is coming up against a very hard deadline," said Justin MacFarlane, director with turnaround firm AlixPartners. "If they can't find a buyer [then] there's a real risk of the company going out of business."
At the time, the retailer announced it would close 155 stores as part of an effort to stay alive, but would remain a going concern while it tried to restructure under bankruptcy protection.
On Friday, Circuit City said in a statement that it filed a motion with the bankruptcy court on Jan. 5 to seek approval to put the company up for sale "as a going concern, as separate business units or as individual assets - including the sale of inventory."
The company said it is in negotiations with two "interested" parties who may either buy the company or provide additional financing to allow it to continue with its restructuring process.
However, Circuit City said that if no agreement is reached by Jan. 16 and it fails to obtain an extension to its debtor-in-possession financing (DIP) credit agreement deadlines, then the company may start to liquidate its assets.
Joseph Steinfeld, bankruptcy expert and managing partner with ASK Financial, said it's likely that Circuit City will get an extension past next week on its DIP financial agreements.
"If that doesn't happen and these deals fall through, then it is very likely that it could go out of business," he said. "It's the same exact situation that confronted Linens N Things and the company was forced to liquidate."