RadioShack stores will live on after judge approves agreement

A federal judge recently approved an agreement under which RadioShack Corporation will continue to exist, but will slim its operations to 1,743 locations and 7,500 employees.

This decision ended a period of uncertainty started when the troubled retailer filed for Chapter 11 bankruptcy earlier this year, according to The Wall Street Journal.

Winning offer

While many competitors bid on the RadioShack assets, hedge fund Standard General LP, currently one of the retailer’s major lenders, submitted the offer – valued at roughly $160 million – that won the approval of U.S. Judge Brendan Shannon, the media outlet reported. Instead of offering cash consideration, the hedge fund offered to cancel RadioShack loans.

Standard General provided a higher bid than other parties interested in RadioShack, and Judge Shannon stated that the hedge fund was the only bidder to offer the “added and terribly important benefit of saving more than 7,000 jobs and preserving a century-old American retailing icon,” according to the news source.

Collaboration with Sprint

Under this plan, cellular service provider Sprint Corp will co-brand with RadioShack and take up one-third of the space in each RadioShack store, Reuters reported.

The 1,743 stores that will be left are a far cry from the more than 4,000 outlets that the troubled retailer operated when it declared bankruptcy, but the plan will allow the company to stay in business, a goal that many retailers have a hard time accomplishing if they file for Chapter 11 bankruptcy, according to the news source.

RadioShack secured this agreement in its final hour, as the company maintained that it needed to finalize a deal by April 1 because it lacked the funds to pay the month’s rent, the media outlet reported.

Creditor troubles

While the company will be salvaged, many of its creditors will receive little or no money as a result of RadioShack selling to Standard General, according to The Wall Street Journal.

“Unfortunately, when it comes to unsecured creditors, there was nothing Standard General could provide from an economic perspective,” a lawyer for the committee representing RadioShack’s unsecured creditors told the news source.

However, Salus Capital, a larger lender, will only receive partial payment from the sale, even though RadioShack owes it $150 million, according to the media outlet. Salus participated in the auction, submitting an offer and then stating over the weekend it would provide another bid which never materialized. Even after failing to provide this new offer, the lender criticized the auction, emphasizing that Standard General won out even though Salus offered $271 million in cash, Reuters reported.