RadioShack received a new lease on life Tuesday as a bankruptcy judge approved the sale of more than 1,740 stores to the Standard General hedge fund, allowing the company to move forward as a smaller operation.
The decision prevented a complete liquidation of the 94-year-old Fort Worth-based electronics retailer, saving thousands of jobs that might otherwise have been lost. The buyer, one of RadioShack’s biggest shareholders, has said it plans to run the business in a co-branding arrangement with Sprint, which will operate “store within a store” shops in most of the locations.
U.S. Bankruptcy Judge Brendan Shannon made his ruling after four days of sometimes contentious hearings in Wilmington, Del., where creditors fought the company and each other over the auction process, how much the stores were worth and how proceeds of the sale should be used.
The judge said he was faced with two alternatives: liquidation or a sale as a going concern.
“The going-concern bid from Standard General is clearly economically superior to the liquidation bid even before taking into account the added and terribly important benefit of preserving over 7,000 jobs and saving a century-old American retailing icon,” Shannon said.
In a statement, RadioShack CEO Joe Magnacca said he was pleased with the court’s decision. “This option provides an opportunity for RadioShack to continue operating as a private company with fewer stores, preserving a number of jobs,” he said.
It remained unclear, however, how RadioShack’s headquarters operation along the Trinity River would be affected. A spokeswoman said it was not known how many Fort Worth jobs would be maintained, or whether the existing management team would stay in place. Earlier this month, the company laid off more workers at the headquarters, where the company has about 500 employees.
According to court filings, six Fort Worth stores are among those that will remain open, including locations on Belknap, Alta Mesa and Western Center Boulevard. Other stores included in the sale are in Arlington, Keller, Southlake, Weatherford, Azle, Saginaw, Bedford and Granbury.
Standard General, which arranged a rescue loan package for the retailer last fall to help fund its holiday merchandise, announced its intention to bid for up to half of RadioShack’s 4,000 stores when the company filed for bankruptcy in early February.
Last week, the New York hedge fund was named the winner of an asset auction, with a bid worth about $145.5 million. But another creditor, Salus Capital Partners, called the auction a sham and asked to reject the result.
In his ruling, Shannon said he found “no just reason for delay” in moving ahead with Standard General’s plans for the electronics retailer. All parties were given “a reasonable opportunity to object or be heard” during the bankruptcy proceedings, he said at the hearing.
As many as 2,100 stores are to be closed under a deal with liquidators Hilco Merchant Resources, Gordon Brothers Retail Partners and Tiger Capital Group. At least 1,400 stores have already closed.
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 including Texas.
The 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.
One sticking point was the amount of RadioShack debt Standard General would be allowed to cancel in lieu of paying cash. Salus, as agent for some lenders, had asked the judge to cap the so-called credit bid. Shannon allowed Standard General to credit bid as much as $112 million.
Standard General isn’t the only investor with plans to use some of RadioShack’s real estate to sell phone service. Spring Mobile, a unit of Grapevine-based GameStop, the video-game chain, won a previous auction for the right to take over about 160 stores.
Spring Mobile has about two months to decide which locations it wants to keep. The intellectual property, including the company’s name, will be auctioned separately.
The company entered bankruptcy with more than 4,000 stores, listing assets of $1.2 billion and debt of $1.38 billion in court documents filed Feb. 5.
This article includes material from Bloomberg News, The New York Times, The Associated Press and Star-Telegram archives.