The RadioShack bankruptcy proceeding has erupted into a high-stakes battle over its assets that pits hedge fund Standard General against another of the electronics retailer’s creditors.
RadioShack announced Thursday that a unit of Standard General had won an auction for 1,743 of its stores and related assets with a final offer of about $140.1 million. Standard General, a major RadioShack lender and shareholder, would keep the stores open and preserve about 7,500 jobs.
But Salus Capital Partners, another creditor, is urging a bankruptcy court judge to go with its bid of about $271 million for RadioShack’s assets, arguing that Standard General’s offer should be rejected because most of it — about $118.9 million — is in the form of credit on debt owed.
RadioShack had nearly 4,000 stores in operation when it filed for Chapter 11 bankruptcy protection Feb. 5. Standard General, a first-tier lender, was the lead bidder in an auction that started Monday, and the official committee of unsecured creditors lined up behind its offer.
Second-tier lender Salus Capital, which led a $250 million secured loan to RadioShack in 2013, is allied to a team of liquidators. At a bankruptcy court hearing Thursday, The Wall Street Journal reports, RadioShack said Salus’s bid is too risky because $129 million in cash would come from litigation and there is no telling how that will play out.
The company called Salus’s bid “demonstrably inferior” to Standard General’s proposal, and urged Judge Brendan Shannon to sign off on a deal it says has no major impediments to closing.
Salus’s lawyers said the auction wasn’t fair, and urged that the bidding be reopened. Salus has gained support from other lenders concerned about Standard General’s credit bid.
RadioShack previously valued Standard General’s stalking-horse offer at $145.5 million. In court papers, the company said the lower winning bid excludes intellectual property and customer data, which were part of the original offer.
The Standard General bid “is the culmination of a series of bids, controlled by insiders of the debtors, that have been steadily walked backwards, resulting in less and less value for the estates,” Salus said in a court filing.
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