An attorney for RadioShack indicated the U.S. electronics retailer may have dozens of bidders for its stores, up to 2400 of which are to be sold to shareholder Standard General as part of a bankruptcy reorganization plan.
The U.S. electronics retailer has lost over 90% of its value over the past few years as it has struggled to attract customers to its often outdated stores.
RadioShack files for bankruptcy
As reported by ValueWalk, RadioShack declared Chapter 11 bankruptcy earlier this month. As a part of the bankruptcy plan, RadioShack has entered an asset purchase agreement with General Wireless Inc., an affiliate of Standard General L.P. General Wireless will take over between 1,500 and 2,400 of RadioShack’s U.S. company-owned stores. Moreover, other parties will have a chance to make offers for RadioShack’s assets in a court-approved bankruptcy process.
RadioShack’s lawyer earlier said the bankrupt electronics chain would accept all kinds of bids for its assets, including from liquidators, though any transaction would require court approval. The firm has a tentative deal to sell as many as 2,400 of its 4,100 stores to an affiliate of hedge fund Standard General, its lender and largest shareholder.
The deal envisages wireless company Sprint Corp would operate within those stores. However, any better bids, which RadioShack lawyer David Fournier indicated could include liquidation offers, may trump that deal. At a hearing in U.S. Bankruptcy Court in Delaware, Fournier said: “We don’t know exactly where we’re going to end up”. U.S. bankruptcy law provides companies in Chapter 11 just 210 days to decide whether to break or reject leases, making it hard for retailers to formulate turnaround plans.
RadioShack creditors’ suspicion
The Wall Street Journal reported last month that RadioShack had been offered $500 million in ongoing financing from one of its creditors (Salus Capital Partners) if it decided to declare bankruptcy. Some analysts argued that this type of bankruptcy financing would increase the lender’s influence if the beleaguered retailer does end up in Chapter 11.
Interestingly, a committee of RadioShack’s landlords, suppliers and bondholders asked the U.S. Bankruptcy Court in Wilmington, Delaware for subpoena power to investigate their suspicions. They said the U.S. electronics retailer timed its bankruptcy to benefit a hedge fund trading strategy, even though it cost the company millions of dollars in added losses. The creditors want access to nonpublic information they say could confirm that RadioShack’s bankruptcy was an “assisted suicide” led by its largest shareholders, the Standard General hedge fund and LiteSpeed Management.
In their filing, the creditors suspect the hedge funds were working with Standard General, and that if RadioShack had filed for bankruptcy before Dec. 20, the hedge funds would have had to pay out on credit default swaps, a type of credit insurance.