Giant US consumer electronics group Circuit City has filed for Chapter 11 bankruptcy protection while in Australia Clive Peeters has admitted that it has breached its banking covenant with the National Australia Bank.
Back in June Clive Peeters said that they had restructured a $30M debt facility with the NAB to a 3 year term now just 5 months later the Company Chairman Brian Pollock has admitted that the Company has already breached their banking covenants.
In Australia Clive Peeters has said that cost-cutting measures failed to compensate for the fact that sales had dived below budget and that sale budgets in for August and September were respectively 6% and 12% below target. “Weak floor traffic accounted for the sales decline, with sharp falls across all states in August and September,” the statement said.
The company said statistics from electrical goods buying group Narta International revealed the overall market was off 23% between July and August, while Clive Peeters fell 15% in the period.
In the US Circuit City has said that they will continue to operate the business as debtors in possession with the help of $1.1 billion in financing from its current lenders.
According to US trade Magazine TWICE the company said it took the action to ensure that vendors would continue shipping it goods through the critical holiday selling season, after which the DIP credit facility will be reduced to $900 million, a filing showed.
Last week the troubled US group said that they were closing 155 stores and had laid off 700 administration and managerial staff in an effort to survive.
The company said that they have $3.4 billion in assets, $2.3 billion in debt, and more than 100,000 creditors. Hewlett-Packard is its largest unsecured creditor, with $118.8 million in claims, followed by Samsung ($115.8 million), Sony ($60 million), LG’s ($41.2 million) and Toshiba ($17.9 million).
