How Can Acting Bankrupt Help Circuit City Avoid Bankruptcy?

Just because Circuit City (CC) CEO Phil Schoonover is gone, it doesn't mean the people who hired him and kept him there can't continue to bury this thing...

The WSJ Reports:

Circuit City Stores Inc. is considering a plan to close at least 150 stores and cut thousands of jobs, as an alternative to filing for bankruptcy-court protection, said people familiar with the company.

Earlier this month, the nation's No. 2 electronics retailer by sales hired Skadden, Arps, Slate, Meagher & Flom LLP -- the law firm that oversaw the Chapter 11 reorganization of Kmart -- as its bankruptcy counsel, according to several people familiar with the matter.

Circuit City also retained FTI Consulting Inc. to develop a turnaround plan and investment bank Rothschild Inc. to guide talks with banks and secure emergency financing, these people said.

What bank in their right mind right now would loan them a penny? Who?

In June of 2007 in a post that speculated on the possibility of a Circuit City  bankruptcy, I said, "if the economy slides any further....see ya'.."  In Sept. of 2007 I said they were on the "Bankruptcy Express"

Now, Circuit City did try to help the management that ran it into the ground by lowering the price points on their stock options in a move to keep this incompetent bunch happy. Stunningly, the performance of the company did not improve. Please note the sarcasm...

Nothing has changed from either post. The good news? The company still does have a good brand, and whoever buys it in bankruptcy has a great opportunity to revitalize it. The price that will be paid will be minimal as the competition for it in the current environment will be minimal. That gives a buyer a tremendous opportunity for success. The bad news? If you are a current shareholder you will get nothing. Sorry...

Comments

[BSexposer:]

Hey Todd, how is your SHLD performing? Keep dancing on other people's graves, buddy - what goes around comes around.

2008 Oct 20 04:37 PM

[BSexposer:]

BTW, there's nobody above the common in the capital structure, just to clue you in. Who do you think will own the company in a CH 11 reorg?

So I guess if you are a current SH, you will get...ownership of the reorganized company [sans leasehold liabilities]. Sorry...

2008 Oct 20 04:57 PM

[stox4u:]

As a former management employee of Circuit City I must say that this company has a great infrastructure and still has potential to regain its place as the number one electronic retailer. YES they’ve had some knuckle heads that over time has ran the company to the brink of bankruptcy but this is no time to rejoice over its failure. I think it’s very un-American to display such enthusiasm towards the misfortunes of any American company in such a financial turmoil. Voices like yours should bear some of the blame along with many others who are scaring this great country into a financial disaster. Circuit City just so happen to have suffered a slight case of pure bad luck like we all experience every now and then as individuals or as a company. I say you give the new CEO a little time to turn this thing around. I am one who believes that Circuit City as well as this country has brighter days ahead

2008 Oct 21 09:12 AM

[stox4u:]

As a former management employee of Circuit City I must say that this company has a great infrastructure and still has potential to regain its place as the number one electronic retailer. YES they’ve had some knuckle heads that over time has ran the company to the brink of bankruptcy but this is no time to rejoice over its failure. I think it’s very un-American to display such enthusiasm towards the misfortunes of any American company in such a financial turmoil. Voices like yours should bear some of the blame along with many others who are scaring this great country into a financial disaster. Circuit City just so happen to have suffered a slight case of pure bad luck like we all experience every now and then as individuals or as a company. I say you give the new CEO a little time to turn this thing around. I am one who believes that Circuit City as well as this country has brighter days ahead

2008 Oct 21 09:13 AM

[billddrummer:]

To stox4u,

I question whether the vendors will give the new CEO "a little time to turn this thing around."

Granted, there's a credit line in place now for current operating expenses, but with the sense that it won't be sufficient to sustain operations through the holidays based on the most recent data, the outlook doesn't look real promising.

2008 Oct 21 02:23 PM

[BSexposer:]

Looks like SHLD was down ANOTHER five percent today, for those of you keeping score at home. Another great call by this Buffett wannabe...

2008 Oct 21 04:53 PM

[notsosmart:]

no surprise here.the floor employees could not care less to take care of the custumer.the last 2x i went in the small group kept right on talking.i had to ask for help each time.i guess the virus spreads from top to bottom.there were other negative experiences i wont go into(boring).maybe their real estate is worth more than the store if they own it.

2008 Oct 21 05:03 PM

[BSexposer:]

Here are the last 4 quarters for SHLD - all misses, some HUGE misses:

-98.0%; -1.9%; -453.3%; and -42.4%.

And they're closing down Kmarts right and left. Great company!

2008 Oct 21 05:08 PM

[BSexposer:]

Don't worry, folks, there are no profits in sight for SHLD - 3rd Q is expected to be ANOTHER big loss. But, by all means, keep trashing CC and lauding SHLD - it's really hilarious, actually.

2008 Oct 21 05:09 PM

[BSexposer:]

I think it's clear - Lampert can't and won't ever be able to compete with WMT. WMT systematically destroys all of its competitors. If you've been in a Kmart recently, you'll realize why - Kmart has ATROCIOUS customer service. It's only a matter of time before SHLD re-enters bankruptcy (AGAIN).

2008 Oct 21 05:25 PM

[BSexposer:]

Hey Todd, I guess Lampert is no Buffett after all, is he? Sorry your hero disappointed you - I guess your still holding all those Citi shares that you bought in the 40s after the genius Lampert dove in - man, what a bad move that was!

Anybody who wants to have a good laugh should go back and read the titles of all of Todd's endlessly pumping SHLD articles (going back to early 2007). It's quite funny - and clear evidence that this "value investor" is utterly clueless [unfortunately par for the Seeking Alpha course though]. Hilarious!

2008 Oct 21 05:49 PM

[billddrummer:]

To notsosmart,

CC owns only 5 of the 714 stores in the US. All the rest are leased, and the company is on the hook for lease termination costs on about 80 vacant buildings already.

So unlocking shareholder value by selling store sites won't work.

The company does own a distribution center in Canada that's home for the InterTAN distribution network and Canadian HQ.

CC also owns some of the land and half the building at HQ in Richmond.

But it's not enough unrealized real estate value to go through the trouble of selling it. Plus, commercial real estate values are down all over the country (if you hadn't already heard).

Not a lot of hidden value on the balance sheet.

2008 Oct 21 06:54 PM

[BSexposer:]

Todd - looks like your favorite stock, SHLD (you remember, the stock you've been relentlessly pumping for the past 2 years), got a special mention today as one of the world's "scariest stocks" - congrats dude.

www.fool.com/investing...

2008 Oct 31 11:49 AM

[BSexposer:]

HEY TODD - JUST CHECKING IN!!!!!!!!!!! How's SHLD holding up? - oh, down another 3.5% I see - slightly underperforming CC, which is up 40% on the afternoon. Have a nice day!

2008 Nov 03 01:20 PM