ccs111208_8k.htm
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
___________
FORM
8-K
CURRENT
REPORT
Pursuant
to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of
Report (Date of earliest event
reported): November 5, 2008
___________
CIRCUIT
CITY STORES, INC.
(Exact
name of registrant as specified in its charter)
Virginia
(State
or other jurisdiction
of
incorporation)
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1-5767
(Commission
File Number)
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54-0493875
(I.R.S.
Employer
Identification
No.)
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9950 Mayland
Drive
Richmond, Virginia
(Address
of principal executive offices)
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23233
(Zip
Code)
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Registrant’s
telephone number, including area code: (804) 486-4000
Not
Applicable
(Former
name or former address, if changed since last report)
Check the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions:
o Written
communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
o Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
o Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b))
o Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
240.13e-4(c))
Item
1.01
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Entry
into a Material Definitive
Agreement.
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On
November 12, 2008, Circuit City Stores, Inc. (the “Company”) and certain of its
subsidiaries (the “Subsidiaries”) entered into a Senior Secured, Super-Priority,
Debtor-in-Possession Credit Agreement (the “DIP Credit Agreement”) with the
banks named in the DIP Credit Agreement as Lenders, Bank of America, N.A., as
administrative agent and collateral agent, General Electric Capital Corporation,
as co-collateral agent, Banc of America Securities LLC, as lead arranger, Banc
of America Securities LLC, GE Capital Markets, Inc. and Wells Fargo Retail
Finance, LLC, as joint bookrunners, Bank of America, N.A. (acting through its
Canadian branch), as Canadian administrative agent and Canadian collateral
agent, Wells Fargo Retail Finance, LLC, as syndication agent, and General
Electric Capital Corporation and JPMorgan Chase Bank, N.A., as co-documentation
agents. The Subsidiaries include each of the Company’s active
domestic subsidiaries, Tourmalet Corp. and InterTAN Canada Ltd. The
Subsidiaries that are co-borrowers under the DIP Credit Agreement are Circuit
City Stores West Coast, Inc., Circuit City Stores PR, LLC and InterTAN Canada
Ltd.
The
Company and the Subsidiaries entered into the DIP Credit Agreement in connection
with filings for relief under the United States Bankruptcy Code and the
Companies’ Creditors Arrangement Act (Canada) made on November 10, 2008, as
described in Item 1.03 below. On November 10, 2008, the Company filed
a motion seeking United States Bankruptcy Court approval of the DIP Credit
Agreement, and the Bankruptcy Court granted interim approval of the DIP Credit
Agreement. Based on such interim approval, the Company and the other
parties entered into the DIP Credit Agreement on November 12, 2008, subject to
final approval of the Bankruptcy Court.
The DIP
Credit Agreement succeeds the Second Amended and Restated Credit Agreement (the
“Prior Credit Agreement”) that the Company and certain of the Subsidiaries had
entered into with the banks named in the Prior Credit Agreement as Lenders, Bank
of America, N.A., as administrative agent and collateral agent, Banc of America
Securities LLC, as lead arranger and joint bookrunner, Bank of America, N.A.
(acting through its Canadian branch), as Canadian administrative agent and
Canadian collateral agent, Wells Fargo Retail Finance, LLC, as syndication agent
and joint bookrunner, General Electric Capital Corporation and JPMorgan Chase
Bank, N.A., as co-documentation agents, and Wachovia Capital Finance Corporation
(Central), as senior managing agent, on January 31, 2008. The
obligations of the Company and the Subsidiaries under the Prior Credit
Agreement, including outstanding borrowings as of November 12, 2008, have been
subsumed under the DIP Credit Agreement.
The
DIP Credit Agreement provides for initial aggregate borrowings of up to $1.1
billion. Of this amount, up to $50 million is available for borrowing
by InterTAN Canada Ltd. These amounts will reduce to $900 million
($50 million for InterTAN Canada Ltd.) on December 29, 2008, increase to $910
million ($60 million for InterTAN Canada Ltd.) on January 1, 2009 and reduce to
$900 million ($50 million for InterTAN Canada Ltd.) on January 17,
2009. The aggregate borrowings limit also includes a $60 million
limitation on swingline loans and a $350 million ($40 million for InterTAN
Canada Ltd.) limitation on standby and documentary letters of credit and
banker’s acceptances.
Actual
borrowings by the Company and the Subsidiaries (except for InterTAN Canada Ltd.)
are subject to a borrowing base, which is a formula based on certain eligible
inventory and eligible credit card receivables of such entities, less certain
professional fee expenses and certain reserves. Actual borrowings by
InterTAN Canada Ltd. are subject to a separate borrowing base covering eligible
inventory that will not reduce available borrowings for the Company and other
Subsidiaries.
The use
of proceeds under the DIP Credit Agreement are limited to refinancing the Prior
Credit Agreement, working capital and other general corporate purposes
consistent with a budget that the Company presented to the Lenders, including
the purchase of inventory and equipment in the ordinary course of business,
payment of costs and expenses related to the administration of the bankruptcy
proceedings, and payment of other expenses as approved by the Bankruptcy
Court. The principal amount outstanding of the loans under the DIP Credit
Agreement, plus interest accrued and unpaid thereon, will be due and payable in
full at maturity, which is the earlier of November 10, 2009 and confirmation of
a plan of reorganization in the bankruptcy proceedings, subject to provisions in
the DIP Credit Agreement providing for an earlier maturity date under certain
circumstances.
Borrowings under
the DIP Credit Agreement bear interest at variable rates based on the prime
rate, LIBOR or the banker’s acceptance rate, depending on the type of borrowing,
plus 4.00% per annum. Interest and fees are payable
monthly. If the borrowers default on their obligations under the DIP
Credit Agreement, the default rate of interest will be the rate otherwise in
effect plus 2.00% per annum.
In
addition to interest, the borrowers are required to pay a commitment fee of
0.75% per annum in respect of the unutilized commitments under the DIP Credit
Agreement. An upfront fee of 1.75% of the aggregate amount of commitments
under the DIP Credit Agreement was payable to the Lenders on November 12,
2008. The borrowers must also pay letter of credit fees.
All
obligations under the DIP Credit Agreement are unconditionally guaranteed by the
Company and the Subsidiaries. All obligations under the DIP Credit
Agreement are secured, subject to certain limited exceptions, by substantially
all of the assets of the Company and the Subsidiaries, including a
super-priority administrative expense claim in the bankruptcy
proceedings. The Bankruptcy Court has scheduled a hearing on December
5, 2008 to consider entry of an order granting final approval of the DIP Credit
Agreement.
The DIP
Credit Agreement contains various representations and warranties, as well as
covenants from the Company and the Subsidiaries and events of default that are
customary for transactions of this nature. The DIP Credit Agreement also
contains certain financial covenants relating to maximum levels of cash
expenditures and minimum levels of inventory and net
availability. The DIP Credit Agreement also requires the Company to
obtain additional term loan financing in an amount equal to at least $75 million
on or before January 17, 2009 in order to prepay amounts outstanding under the
DIP Credit Agreement. In addition, the DIP Credit Agreement includes
covenants related to the progress of the bankruptcy proceedings, including
actions relating to the Company’s plan to close certain domestic stores and the
filing of a plan of reorganization on or before March 1, 2009.
In
addition to participation in the Credit Agreement, certain of the Lenders or
their affiliates provide other services to the Company and the Subsidiaries,
including cash management services, leasing arrangements, private-label credit
services, credit card processing services and other corporate financial
services.
Item
1.02 Termination of a Material
Definitive Agreement.
On
November 12, 2008, the Company and the Subsidiaries entered into the DIP Credit
Agreement, as described in Item 1.01 above. The DIP Credit Agreement
succeeds the Prior Credit Agreement as of that date.
The Prior
Credit Agreement provided for aggregate borrowings of up to $1.3 billion. Of
this amount, up to $50 million was available for borrowing by InterTAN Canada
Ltd. The borrowings under the Prior Credit Agreement were secured
primarily by the Company’s inventory and credit card
receivables. Borrowings under the Prior Credit Agreement were
available for working capital, letters of credit, capital expenditures,
permitted acquisitions, permitted share repurchases, permitted dividends,
repayment of permitted indebtedness and other general corporate
purposes. Borrowings under the Prior Credit Agreement bore interest
at variable rates based on the prime rate, LIBOR or the banker’s acceptance
rate, depending on the type of borrowing, plus an additional margin based on the
type of borrowing and the amount of
available borrowings under the Prior Credit Agreement.
Additional
information with respect to the Prior Credit Agreement is included in Item 1.01
above, and a summary of the Prior Credit Agreement was set forth in the
Company’s Current Report on Form 8-K filed with the Securities and Exchange
Commission on February 6, 2008.
Item
1.03 Bankruptcy or
Receivership.
On
November 10, 2008, the Company and each of its wholly-owned United States and
Puerto Rican subsidiaries filed voluntary petitions for reorganization relief
under Chapter 11 of the United States Bankruptcy Code in the United States
Bankruptcy Court for the Eastern District of Virginia. The Company
and the subsidiaries will continue to manage their properties and operate their
businesses as “debtors-in-possession” under the jurisdiction of the Bankruptcy
Court and in accordance with the applicable provisions of the Bankruptcy Code
and the orders of the Bankruptcy Court.
In
addition, on November 10, 2008, InterTAN Canada Ltd., the Company’s Canadian
operating subsidiary, received creditor protection from the Ontario Superior
Court of Justice under the Companies’ Creditors Arrangement Act (Canada) (the
“CCAA”). InterTAN Canada Ltd. will also manage its property and
operate its business as a "debtor-in-possession" under the jurisdiction of the
Canadian Court and in accordance with the CCAA and the orders of the Canadian
Court. As required by the CCAA, the Canadian Court also appointed
Alvarez & Marsal as Monitor to monitor InterTAN Canada Ltd.’s property and
the conduct of its business.
On
November 10, 2008, the Company issued a press release with respect to the
foregoing events. A copy of the press release is being filed as
Exhibit 99.1 to this report and is incorporated by reference into this Item
1.03.
In
connection with the filings for relief under the United States Bankruptcy Code
and the CCAA, the Company and the Subsidiaries entered into the DIP Credit
Agreement on November 12, 2008, as described in Item 1.01 above.
Item 2.03
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Creation
of a Direct Financial Obligation or an Obligation under an Off-Balance
Sheet Arrangement of a Registrant.
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On
November 12, 2008, the Company and the Subsidiaries entered into the DIP Credit
Agreement. The information provided in Item 1.01 above is
incorporated by reference into this Item 2.03.
Item
2.04
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Triggering
Events That Accelerate or Increase a Direct Financial Obligation or an
Obligation under an Off-Balance Sheet
Arrangement.
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On
November 10, 2008, the Company and each of its wholly-owned United States and
Puerto Rican subsidiaries filed voluntary petitions for reorganization relief
under Chapter 11 of the United States Bankruptcy Code in the United States
Bankruptcy Court for the Eastern District of Virginia, as described in Item 1.03
above. The filing of the bankruptcy petitions constituted an event of
default under the Prior Credit Agreement, which is described in Item 1.02
above. As a result of such event of default, all obligations under
the Prior Credit Agreement became automatically and immediately due and
payable. The total amount of such obligations was $898.0 million as of
November 10, 2008.
While the
Company believes that any efforts to enforce such payment obligations under the
Prior Credit Agreement are stayed as a result of the filing of the bankruptcy
petitions, the obligations of all parties to the Prior Credit Agreement under
such agreement have been subsumed by the DIP Credit Agreement, as described in
Item 1.01 above.
Item
2.05
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Costs
Associated with Exit or Disposal
Activities.
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On
November 5, 2008, the Board of Directors of the Company approved a plan to
reduce its corporate headquarters workforce. The plan specifically
resulted in the termination of 712 positions, some of which were open positions,
in corporate, regional and district support areas on November 7,
2008. The determination to approve the plan resulted from the
Company’s ongoing asset productivity assessment and working capital situation,
which included a realignment of the Company’s regional and district support
structure following the commencement of a plan to close 155 domestic segment
stores.
The
Company is currently unable in good faith to make a determination of an estimate
of the amount or range of amounts expected to be incurred in connection with the
plan to reduce its corporate headquarters workforce, both with respect to each
major type of cost associated with the plan and with respect to the total cost
of the plan, or an estimate of the amount or range of amounts that will result
in future cash expenditures. The Company will include such estimates,
once they are determined, in an amendment to this report.
Item
3.01
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Notice
of Delisting or Failure to Satisfy a Continued Listing Rule or Standard;
Transfer of Listing.
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On
November 10, 2008, the Company received a notice from the New York Stock
Exchange (the “Exchange”) that the Exchange had determined that the listing of
the Company’s common stock should be suspended immediately. The
Exchange noted that it reached this decision in light of the Company’s
announcement to file a voluntary petition for reorganization relief under
Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy
Court, which is described in Item 1.03 above. As previously
announced, the Company also was not in compliance with the Exchange’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 October 22, 2008.
The last
day that the Company’s common stock traded on the Exchange was November 7,
2008. The Company does not intend to take any further action to
appeal the Exchange’s decision, and therefore it is expected that the common
stock will be delisted after the completion of the Exchange’s application to the
Securities and Exchange Commission.
Item
5.02
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Departure
of Directors or Certain Officers; Election of Directors; Appointment of
Certain Officers; Compensatory Arrangements of Certain
Officers.
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On
November 9, 2008, the Board of Directors amended the Circuit City Stores, Inc.
Supplemental 401(k) Plan in connection with its approval of the filings for
relief under the United States Bankruptcy Code on November 10, 2008, as
described in Item 1.03 above. The Supplemental 401(k) Plan is an
unfunded, non-qualified deferred compensation plan designed to provide benefits
for executive officers affected by limits on qualified retirement plans under
the Internal Revenue Code of 1986, as amended. Executive officers may
defer up to 40% of their compensation and are eligible to receive a matching
contribution of up to four percent of their compensation, less the amount
contributed as a matching contribution under the Company's tax-qualified
401(k) plan. The amendments to the Supplemental 401(k) Plan on
November 9, 2008 immediately
ceased the Company’s matching contributions under such
plan, allowed plan participants to cease their salary contributions at any
time in their sole
discretion, and ceased all participant contributions as of January 1, 2009.
Item 9.01
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Financial Statements
and Exhibits. |
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(d)
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Exhibits.
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Exhibit
No.
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Description
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99.1
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Press
release issued November 10, 2008
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SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, as amended, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
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CIRCUIT CITY STORES,
INC.
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(Registrant)
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Date: November
12, 2008
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By: /s/Reginald
D. Hedgebeth
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Reginald D.
Hedgebeth
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Senior Vice
President,
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General Counsel and
Secretary
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EXHIBIT
INDEX
Exhibit
No.
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Description
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99.1
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Press
release issued November 10,
2008
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