Wilmington, Delaware - A hearing on RadioShack’s plan to sell about 1 700 stores to its biggest shareholder is set to continue on Tuesday, with the prospect of thousands of job losses if the deal falls through.
Standard General LP’s bid to take over the stores and run them in a co-branding arrangement with Sprint has met opposition from some creditors and been threatened by infighting among lender groups. Standard General said jobs will be preserved if its plan is approved. Otherwise, the assets will be liquidated and stores closed.
“There are over 7 000 jobs and very large business at stake,” US Bankruptcy Judge Brendan Shannon said on Monday in Wilmington, Delaware, where he’s been hearing arguments since March 26.
A key issue in court is who shall be liable if lower-ranking creditors including Salus Capital Partners LLC successfully sue lenders for pre-bankruptcy actions. The official committee of unsecured creditors is investigating whether some RadioShack lenders could be held responsible for the electronics retailer’s bankruptcy.
One of two lender groups, known as the ABL lenders, claim their credit agreements give them protection from potential judgments. They have demanded that $120 million from the sale of Fort Worth, Texas-based RadioShack be set aside either as cash or equity in the company, which would be used to pay a judgment.
Lack power
Shannon said in court he is taking seriously the request by the ABL lenders for lawsuit protection because they’re secured creditors. He also told the two sides to negotiate an amount less than $120 million. RadioShack lawyer Gregory Gordon suggested $7 million. Damian Schaible, an attorney for the ABL lenders, said he would talk to his clients about the reserve.
Shannon said he was “troubled” by the parties’ positions on certain issues and doesn’t want to turn the company over to liquidator Hilco Merchant Resources.
“If that is the way this case needs to turn out, that is how it will turn out,” he said. “But I don’t think it’s the best choice for stakeholders in the process and I will use whatever authority and power I have to move to what I think is a fair and appropriate result.”
He asked that smaller issues be worked out prior to the hearing.
Bloomberg