Judge: Circuit City can break leases

By: Louis Llovio | Times-Dispatch
Published: February 14, 2009

Circuit City Stores Inc. can sell or break leases at its stores, distribution centers and offices, a bankruptcy judge ruled yesterday.

The auctioning of the leases will proceed on two tracks, depending on when the chain's stores close.

The Henrico County-based retailer filed for bankruptcy in November. After failing to find a buyer or capital to keep operating, the company decided last month to liquidate its stores and lay off 34,000 employees.

The store liquidation sales that began Jan. 17 will continue until March 31 at the latest. Stores can close earlier when they run out of merchandise.

Gregg M. Galardi, Circuit City's bankruptcy attorney, said at yesterday's hearing that the going-out-of-business sales at the chain's remaining 567 stores were going so well that some stores might close at the end of this month.

The store liquidations are "going faster than originally thought," he said.

Circuit City could know about early closings by the middle of next week.

Bids for those stores are due by Feb. 24, with an auction scheduled for Feb. 26.

The company would take winning bids back to the U.S. Bankruptcy Court in Richmond on March 3 for approval or to hear objections.

For leases at the remaining stores that are to close by March 31 and other facilities, bids are due March 5 and the auction date is March 10.

The court will rule on those bids at a hearing March 13.

In both cases, landlords will be allowed to file objections on issues related to the leases.

Those leases not sold at auction will then be broken, as allowed under bankruptcy.

The leases on the company's two headquarters buildings on Mayland Drive also will be auctioned off.

Headquarters employees staying on as the chain winds down its operations have already consolidated in one building, according to company spokesman Bill Cimino. The employees will remain there as the company closes its books, which could take two years.

Yesterday, Circuit City also won final approval to sell its two corporate jets: a 2001 Learjet 45 for $4.35 million and a 1996 Hawker 800XP for $4.5 million.

Judge Kevin R. Huennekens approved several other motions, including one allowing Circuit City to sell off damaged merchandise online.

Several other motions, including one filed by Chase Bank USA asking to break a credit-card agreement with Circuit City, were postponed until later hearings.

Contact Louis Llovio at (804) 649-6348 or LLLovio@timesdispatch.com.