Richmond, Va.-based electronics retailer Circuit City Stores announced last week it would close 19 of its 636 stores, just as hedge-fund Highland Capital Management made a $3.25 billion bid for the company. Though an imminent takeover may not by itself mean bad things for the company's ABS, sources say more closings could impact the performance of the company's master trust.
Like many retailers with branded credit card lines, Circuit City sold its credit card operations to a larger entity. In early 2004, Bank One bought Circuit City's credit card operations, shortly before the bank itself was acquired by JPMorgan Chase. That means any immediate concern over account servicing is alleviated, since JPMorgan is one of the largest credit card servicers in the world. Circuit City also has two separate credit card lines, one with cards backed by Visa and MasterCard, and one private label card that can only be used at Circuit City stores. It is the private label card that could become a problem, sources said.