Joel R. Glucksman
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201-896-7095 jglucksman@sh-law.comFirm Insights
RadioShack Preparing For Bankruptcy Courts
Author: Joel R. Glucksman
Date: February 4, 2015
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Electronics retailer RadioShack is considering a move that would see it selling assets out of bankruptcy.
Radioshack is preparing to file for protection under Chapter 11 of the bankruptcy law as early as next month, according to Bloomberg. It is also in talks with Sprint Corp. to sell the leases on some of its stores.
RadioShack has experienced 11 consecutive quarters of losses as many of its primary consumers have moved to Internet shopping, the news source explained. A court restructuring would, ideally, allow it to emerge as a leaner business. This could include downsizing to between 2,000 and 3,000 stores, compared to the more than 4,000 it currently owns. It is also looking for a potential lender to finance its trip through bankruptcy court.
In September, RadioShack reported larger losses than were expected, according to Reuters. This prompted the retailer to warn at the time that a bankruptcy filing was a possibility. Salus Capital Partners has already said that it would provide $500 million to the struggling retailer a debtor-in-possession loan.
Shares in the company had fallen almost 60 percent between its bankruptcy warning in September and the market’s close on Jan. 13, the news source reported.
As an alternative to the plan offered by Salus Capital Partners, RadioShack’s biggest shareholder Standard General LP has arranged a rescue package in the form of a restructuring loan including plans for asset sales in bankruptcy, according to Bloomberg.
As RadioShack shrinks, Sprint seems to be poised to gain from its losses. Marcelo Claure, CEO of Sprint Corp., told investors at a recent Citigroup Inc. conference that the company would be adding retail locations, the news source reported.
“This is a year in which we intend to grow our distribution dramatically,” Claure said at the conference. “You are going to see the opening of more and more Sprint stores as this is one area that we work on.”
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