Fort Worth-based RadioShack has won provisional bankruptcy court approval for a loan to help fund store closings as it seeks to cut the number of its locations roughly in half.
The retailer, which filed for bankruptcy Thursday, agreed to cap its temporary borrowing at $10 million, Greg Gordon, a lawyer for RadioShack, told U.S. Bankruptcy Judge Brendan Shannon on Monday in Wilmington, Del. As many as 2,100 of the company’s more than 4,000 stores are to be closed under a deal with liquidators.
RadioShack hopes to close “as many stores as possible” by months’ end, said Thomas A. Howley, another company attorney. “We need to maintain the momentum.”
On Friday, Shannon allowed RadioShack to begin store-closing sales through the weekend. The company will return to court Friday to seek final approval for the loan and the store-closing program.
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The company filed for bankruptcy last week, saying it had an agreement to sell 1,500 to 2,400 of its locations to a unit of Standard General L.P., its biggest shareholder. Standard General has a deal with wireless carrier Sprint Corp. to set up stores-within-stores at as many as 1,750 locations.
RadioShack was forced to seek bankruptcy protection after losing money for nearly three years as it lost sales to rivals including Amazon.com, Wal-Mart and Best Buy.
In a court filing, Standard General said its deals with RadioShack were negotiated at arm’s length after funds managed by Cerberus Capital Management alleged that it may be biased by its status of an “insider” at the retailer.
Cerberus, led by Stephen Feinberg, owns $100 million of RadioShack’s bank loans. It originally tried to stop the retailer from borrowing more money from Standard General and other lenders, warning a judge that the hedge fund’s bids for RadioShack stores might be influenced by its “de facto control” of the retailer.
According to Cerberus, all of Standard General’s conduct in the case “warrants close scrutiny.”
Another charge that Standard General is an insider came from Wilmington Trust, a trustee for unsecured lenders that said the hedge fund has “had access to confidential information and the debtors’ board of directors management and advisers for an extended period of time.”
Also Monday, A&G Realty Partners of Melville, N.Y., said it has been retained by RadioShack to manage the sale of its store leases and warehouses.