Blown Circuit?

Electronics retailer Circuit City could be headed for bankruptcy

The tightening credit market is putting the squeeze on Circuit City, as the big box chain is facing a massive hike in its debt payments.

Circuit City's long-term debt, which is tied to the London InterBank Offered Rate -- the rate at which banks lend money to other banks in London -- has the company facing the possibility of an extra $2 million in quarterly interest payments, reports Bloomberg News.

"The risks of bankruptcy are very real," for Circuit City, wrote analyst David Schick of Stifel Nicolaus & Co. "Vendors will have to decide how they plan to do business at Circuit City."

In the past week the company has announced the suspension of new store openings for fiscal year 2010 and said they may begin closing unprofitable locations.

Company spokesman Bill Cimino remains upbeat, of course.

"We feel we have adequate liquidity to fuel our turnaround, providing our vendors can support us," Cimino said. "Even though the capital markets are making things more difficult for them, our vendors are sticking with us."

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