Nov. 11 (Bloomberg) -- Circuit City Stores Inc., the consumer electronics chain that filed this year's biggest retail bankruptcy, arranged $1.1 billion in financing that gives the 59-year-old company another chance at survival.

The seller of televisions and computers sought protection from creditors yesterday and won court approval for a Bank of America Corp. credit line that Circuit City said will help pay for its emergence from bankruptcy next year.

Suppliers cut off credit to the Richmond, Virginia-based retailer and demanded cash for shipments to almost 1,500 U.S. and Canadian stores on the eve of the holiday shopping season.

That will give the chain ``another lease on life,'' Chris Horvers, an analyst with J.P. Morgan Securities Inc., wrote in a note to clients yesterday.

Circuit City said the loan, which comes from its current lenders, will pay salaries and buy merchandise while it restructures. The same banks backed Circuit City's existing $1.3 billion credit line.

The chain obtained financing in the midst of a global credit crunch that has forced some companies to put off bankruptcy filings for lack of funding, said CreditSights Inc. analyst Chris Taggert. Circuit City's loan may not be a sign that that the crunch has eased, given that Bank of America and other lenders were largely repackaging existing credit lines, he said.

``This $1.1 billion isn't $1.1 billion of added liquidity, so the words aren't as good as the music,'' said Taggert.

Money Owed

The chain, which started in 1949 as a television store, owes $119 million to Hewlett-Packard Co., the world's largest maker of personal computers, and $116 million to Samsung Electronics Co., the top maker of flat-panel displays, according to the company's bankruptcy filing yesterday. Circuit City listed assets of $3.4 billion and debt of $2.32 billion in its Chapter 11 petition.

The company said it is closing 155 stores and cut about 20 percent of its 43,000-employee workforce. It will attempt to shut more locations and find a buyer for a slimmed-down version of the chain, or remain as a stand-alone retailer, lawyers for the told the judge.

The loan may be a signal that the company's banks expect it to emerge from bankruptcy next year as a stronger company, said Colin McGranahan, an analyst with Sanford C. Bernstein & Co., who said he was surprised Circuit City managed to secure the financing.

Improved lending conditions, the store closings and job cuts announced last week might have helped appease lenders, said McGranahan, who has followed the retail industry for 14 years.

`Healthier' Markets

``The credit market generally is a lot healthier today than a week or two ago and certainly than it was four weeks ago,'' he said.

Circuit City, the biggest electronics retailer in the U.S. until the mid-1990s, filed for bankruptcy before the holiday selling season, the source of most of its profit. The chain, plagued by older stores in less profitable areas, is losing market share to Best Buy Co. and Wal-Mart Stores Inc., while Amazon.com Inc. and other online retailers undercut it with lower prices.

Circuit City said it plans to file an outline of a reorganization plan with the court by March and hopes to exit bankruptcy in June.

Even if Circuit City fails to attract a buyer or win support of suppliers in coming months, it's unlikely to shut down immediately, said Paul Traub, who has served as a consultant for bankrupt housewares retailer Linens 'n Things Inc. That company abandoned plans to reorganize and instead decided to liquidate this year. Traub said Circuit City doesn't have time to arrange a liquidation of its stores by the end of the year.

Management tried to sell the company in May after Blockbuster Inc. made a preliminary offer that was later withdrawn. The retailer fired higher-paid workers and opened smaller stores to cut costs. Until the shift, the company's strategy had been to sell in locations as large as 44,000 square feet.

Huennekens also gave the company permission to honor gift cards and warranty programs.

To contact the reporters on this story: Dawn McCarty in Wilmington, Delaware, at dmccarty@bloomberg.net; Mark Clothier in Atlanta at mclothier@bloomberg.net

Last Updated: November 11, 2008 00:01 EST