Circuit City secures debtor-in-possession financing

Circuit City Stores received final approval for $1.1 billion in debtor-in-possession financing to allow it to continue to pay vendors and employees as it seeks to restructure itself after its bankruptcy filing last month.

Meanwhile, the company's operations have continued to deteriorate even more rapidly than it had forecast when it made the filing.

The company had anticipated same-store sales declines of as much as 35% when it produced its first bankruptcy budget but the company is now saying that sales at stores that aren't closing are down as much as 50% year over year.

Circuit City said in a statement that "With the continued deterioration of the macroeconomic climate, results from other retailers and our operating under Chapter 11 reorganization protection, the fact that our sales are somewhat weaker than our original forecast should not be considered a negative." The company is also looking to void leases on 154 stores it is liquidating after efforts to sell those leases failed to produce enough bids.

The bankruptcy court also let the company void employment and severance contracts with 40 former employees, including the CEO who drove the bus into the ditch: Philip Schoonover.

The company seems to think it can restructure and make a comeback with fewer stores and a better balance sheet. But the fact that better-financed competitors like Best Buy (NYSE: BBY) haven't made a bid for the company indicates that those in the know aren't so optimistic about Circuit City's future.