Tweeter seeks bankruptcy protection
Struggling Tweeter Home Entertainment Group Inc., hit by declining profits from projection and flat-panel television sales and competition from large-scale retailers, filed for Chapter 11 bankruptcy protection yesterday.
Tweeter reported a $38 million operating loss in the first three months of the year in May, when it first issued warnings of possible bankruptcy. The Canton consumer electronics chain had been hurt by declining demand for projection TVs and rapid decline in price of flat-panel TVs. William Armstrong, an analyst with CL King & Associates, told Reuters that Tweeter's competition with Best Buy Co. and Circuit City "puts them in a very weak position."
Joe McGuire , Tweeter's chief executive, said bankruptcy is just another tool to help restructure the company and said he hopes the company will come out as a smaller but healthier organization.
"We were really not able to work that out outside of the courts," he said, adding that the court proceedings will give the company a more structured way to manage the process.
The future for Tweeter remains uncertain. It was in the process of closing 49 of its 153 stores and cutting 650 jobs , work begun in March as part of the restructuring plan, when the company said it might file for Chapter 11 if it could not raise more money or settle with landlords of the 49 stores it wants closed.
According to its filings with the US bankruptcy court in Wilmington, Del., the company's debts total more than $190 million , and there may be as many as 50,000 debtors. While the restructuring is ongoing, McGuire said a sale is possible -- an outcome he was not actively considering in May. Although no suitors were named, McGuire said potential buyers could include hedge funds or other financial firms.
Tweeter plans on completing the closures by the end of the month, as about half of the 49 stores remain open. The rest of the stores will stay open for the foreseeable future; McGuire said the company was able to acquire $60 million in debtor-in-possession credit from General Electric Capital Corp. to pay wages, maintain inventory, and pay off other general expenses by filing for bankruptcy, another incentive for the move. The chain plans on catering exclusively to affluent customers; McGuire said 60-inch flat-panel TVs will be their best sellers during the holiday season, a continuation of a trend of customers looking for bigger TVs.
The company also terminated all of its naming agreements with concert venues throughout the United States in May to cut expenses. The naming agreement with the Tweeter Center for Performing Arts in Mansfield will expire at the end of the 2008 concert season.
"We didn't feel like the naming rights bought us the value in relation to cost," McGuire said.
Se Young Lee can be reached at vlee@globe.com. 
