RadioShack creditors clear path for end of bankruptcy

RadioShack’s creditors committee has secured court backing for a settlement with senior lenders that removes a potential impediment to approval of the company’s bankruptcy plan at a confirmation hearing next month.

Separately, a hearing on a demand by Texas Attorney General Ken Paxton that holders of gift cards receive information from the court was rescheduled for Aug. 26. The confirmation hearing has been set for Sept. 16.

When RadioShack sold assets this year, including more than 1,700 stores to the Standard General hedge fund, senior lenders got $12 million from the proceeds. The money was put into escrow accounts for paying expenses and settlements of lawsuits in which the senior lenders have indemnification from RadioShack, which changed its name to RS Legacy Corp. after the sale.

The unsecured-creditors committee threatened to sue, claiming defects in the senior lenders’ lien package. By settling, lenders agreed to collect only from the escrow account in compensation for indemnification claims, in return for the unsecured creditors’ agreement not to sue.

Although the creditors won’t sue that lender group, the plan allows them after bankruptcy to sue officers and directors, along with Standard General.

The Fort Worth-based electronics retailer filed for Chapter 11 bankruptcy in February after two years of losses and declining sales. The judge approved the sale of stores to Standard General in April, and the rest of the chain’s 4,000-plus stores have been closed.

The retailer’s remaining assets are the subject of the continuing bankruptcy proceedings in Wilmington, Del.

This story was originally published August 18, 2015 at 4:59 PM with the headline "RadioShack creditors clear path for end of bankruptcy."