Creditors set to oppose RadioShack store sale to Standard General

RadioShack’s lenders are ganging up to stop the bankrupt electronics retailer from giving its biggest shareholder what they call a “special insider bonus” by letting it swap the chain’s best stores for debt it bought a few months ago.

Two groups of junior lenders say the company’s plan to sell up to 2,400 stores to Standard General will discourage would-be bidders for the stores. The proposed auction plan amounts to a deal to “walk hand in hand” with hedge fund Standard General, a committee representing lenders said in a court filing Wednesday.

Ten firms are weighing whether to compete in the bidding, the committee said, adding that creditors would benefit from a higher price if they bid. The Fort Worth-based retailer is seeking fast approval for its store auction. A Bankruptcy Court hearing is set for Friday.

“Standard General is leveraging its putatively secured position with respect to a subset of assets to acquire valuable unencumbered assets on the sly or on the cheap (or both),” the committee said in the filing in U.S. Bankruptcy Court in Wilmington, Del.

The committee contends that the hedge fund should be required to buy assets using cash rather than secured debt.

RadioShack’s plan to sell stores to Standard General, with Sprint lined up as a tenant, is drawing a raft of objections, including from landlords. The hedge fund, which arranged a big RadioShack borrowing last fall, has denied it has insider status with special powers over the company.

Standard General will receive at essentially no-cost store leases worth more than $40 million, while furniture, fixtures and the Sprint deal were “thrown in” for $3,000 a store, the official committee of unsecured creditors said. It has hired a law firm to help investigate and possibly sue over RadioShack’s pre-bankruptcy deals. In a 40-page filing, the committee’s attorneys liken the bankruptcy filing to an assisted suicide and say the retailer should have filed a year ago to preserve assets.

David Glazek, a Standard General partner, said the firm’s proposal to buy about half the stores “is the best chance to preserve the business as a going concern, thereby preserving more than 10,000 jobs and resulting in creditor recoveries substantially above liquidation.”

“These allegations are without substance,” he said in an emailed statement.

The creditor committee has support from Wilmington Trust, which said Wednesday that the hedge fund’s claim on assets was debatable and that its bid would work “to the severe detriment” of junior lenders. The trustee says the hedge fund’s status as almost a RadioShack insider comes from its “access to confidential information and the debtors’ board of directors, management and advisers.”

This story was originally published February 19, 2015 at 10:38 AM with the headline "Creditors set to oppose RadioShack store sale to Standard General."