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Circuit City Files for Bankruptcy Protection

When its suppliers heard the news it spooked them into demanding even more money upfront

Last week Circuit City, the second-biggest electronics retailer in the US, decided to close down 25% of its stores, some 155 shops, by December 31 – in part because suppliers wanted to be paid upfront.

When its suppliers heard the news it spooked them into demanding even more money upfront – or else no deliveries for the holidays.

With consumer spending dying, the liquidity crisis at the bank and quarters worth of losses on the books, Circuit City didn’t have the money – or a sales staff that knows much of anything – so it sought refuge in Chapter 11 Monday.

It’s got a special $1.1 billion debtor-in-possession line of credit to keep the doors open while it tries to sort itself out. Such a thing is practically miraculous these days.

Its biggest creditors are HP ($119 million), Samsung ($116 million), Sony ($60 million), Zenith ($41 million) and Toshiba ($18 million) but it owes a lot more.

It’s laying off about 17% of its domestic work force, roughly 7,300 people.

An AP story said Chapter 11 could help get the company out of leases for some bad store locations, which has been a chronic problem for the company.

More Stories By Maureen O'Gara

Maureen O'Gara the most read technology reporter for the past 20 years, is the Cloud Computing and Virtualization News Desk editor of SYS-CON Media. She is the publisher of famous "Billygrams" and the editor-in-chief of "Client/Server News" for more than a decade. One of the most respected technology reporters in the business, Maureen can be reached by email at maureen(at)sys-con.com or paperboy(at)g2news.com, and by phone at 516 759-7025. Twitter: @MaureenOGara

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