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RICHMOND, VA-Circuit City’s latest sale is itself. The question is, can it complete the sale in time to avoid liquidation? On Friday, Jan. 5, the troubled electronics chain, operating under Chapter 11 protection since Nov. 10, 2008, received approval from the U.S. bankruptcy Court to continue negotiations to put the company up for sale as a going business, separate business or individual assets. It also revealed it is in discussions with two unnamed parties regarding a deal that would allow it to remain in business.

“These interested parties are considering providing additional financing to allow the company to sustain operations and move forward with a subsequent restructuring through a stand-alone plan and/or purchasing the company or all or substantially all of the company’s assets,” said a statement from Circuit City. “The parties have substantially completed due diligence and now are in negotiations with the company and the company’s major stakeholders in order to finalize such a transaction. While the company is optimistic that a transaction can be successfully finalized, no assurance can be given that this will occur.” However, an auction of the company can begin on Jan. 13, and if a sale agreement is not completed by Jan. 16, a liquidation process can begin.

The credit crunch, however, is limiting options for what should be a viable chain, says Lon Rubackin, managing partner of GFI Retail Services Group and a former executive at defunct electronics chain Nobody Beats the Wiz. “The industry absolutely needs a second chain [to rival Best Buy],” Rubackin said. “Consumers need this.”

While consumers can turn to discounters such as Costco, Target and Walmart for some electronics needs, others need expert salespeople to explain more complicated equipment. Circuit City erred years ago when it laid off its most experience sales associates in an effort to compete with the lower-cost stores, while not adding new merchandise categories, such as computers, as Best Buy did. Many speculate that one of the two possible buyers is Carlos Slim Helú, the Mexican billionaire who acquired, but ultimately failed to save, CompUSA.

“I wouldn’t be surprised if the second buyer is someone we’ve never heard of,” Rubackin added, adding that he doesn’t expect a real estate developer to emerge a la Vornado’s acquisition of Toys R Us or NRDC’s purchase of Lord & Taylor. The company has great locations, he said, but because it has been paying market rents, “There’s not a lot of value in their leases.”

Circuit City Stores operates 567 stores in 153 U.S. media markets and approximately 765 retail stores and dealer outlets in Canada. The company noted that it has continued to operate its business without interruption, and has made progress on its restructuring, including completing the previously announced closing of 155 underperforming US stores. Sales in the last two weeks of December “improved significantly,” it said.

“If run right, Circuit City should survive,” Rubackin said. “But without credit to do the transaction, that’s the $64,000 question.”

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