WILMINGTON, Del. (AP) — A hearing on whether to approve the bankruptcy sale of assets of electronics retailer RadioShack opened Thursday with the company seeking court approval of the purported winning bid, and an attorney for a losing bidder describing the auction as a sham and asking a Delaware judge to reopen the sale process.
RadioShack, based in Fort Worth, Texas, says an offer valued at about $160 million from hedge fund Standard General LP was the best bid submitted in an auction that began Monday in New York and was suddenly reconvened in Wilmington, Delaware after midnight Thursday, just hours before the court hearing.
Standard General’s bid, which would keep 1,743 stores open and preserve about 7,500 jobs, consists mostly of credit on debt it is owed.
In last-minute revisions to its initial offer, Standard General agreed among other things that intellectual property and customer data would not be part of the sale. The planned inclusion of personally identifiable information on 117 million consumers had prompted objections from government authorities in several states.
RadioShack’s bankruptcy plan calls for Sprint, the No. 3 U.S. wireless carrier, to operate dedicated “store within a store” shops in most of the RadioShack locations acquired by General Wireless, a newly formed affiliate of Standard General. The proposed sale agreement gives Standard General a six-month, royalty free license to use the RadioShack trademark, which would either have to be purchased later or replaced with a new name.
“It’s an iconic brand,” RadioShack attorney Greg Gordon noted at Thursday’s hearing, which will resume Friday morning.
Meanwhile, Salus Capital Partners, a pre-bankruptcy lender whose $150 million claim makes its one of RadioShack’s largest creditors, says it is willing to pay about $271 million for RadioShack’s assets, and that this week’s auction was simply a charade in which Standard General cut a deal.
Salus also argued along with other senior RadioShack lenders at a hearing Thursday that Standard General hasn’t met the requirements for being allowed to credit bid.
Jay Goffman, an attorney for Salus, argued that Standard General is trying to credit bid using claims that are actually owed to other lenders, who have objected to the sale.
“We know a sham when we see one,” said Goffman, who asked Judge Brendan Shannon to reopen the bidding.
“Have people put real bids out there, and let’s maximize the value,” he said.
Gordon, the RadioShack attorney, said the company rejected Salus’s bid because it includes $129 million in cash that is contingent on winning litigation over a dispute involving the rights of various pre-bankruptcy lenders.
“They were given every opportunity to submit a bid that was higher or better than the General Wireless bid,” he said, describing the Salus bid as clearly inferior to both the Standard General offer and a liquidation bid by a third bidding group.
Meanwhile, Damian Schaible, an attorney for another group of senior pre-bankruptcy lenders, argued that Standard General cannot credit bid unless and until certain requirements are met. Those include his clients being paid in full and indemnified from any liability arising from potential litigation filed by RadioShack’s official committee of unsecured creditors over pre-bankruptcy loan deals, or from a complaint filed by Salus last week against his clients and Standard General.
RadioShack, which has not turned a profit since 2011, sought bankruptcy protection in February after years of financial struggles.
The company, founded in Boston in 1921, began as a distributor of mail-order ship radios, ham radios and parts. In postwar era, it made a name for itself selling high-fidelity audio components, calculators, early personal computer systems and mobile phones, and the computer industry’s first laptop.