RadioShack Lenders Decry ‘Glorified Liquidation’ to Insiderundefined
Cerberus Capital Management LP and other RadioShack Corp. lenders are ganging up to stop the bankrupt electronics retailer from selling its best stores to hedge fund Standard General LP in what they say is a “glorified liquidation” to an insider.
Cerberus and Salus Capital Partners LLC, which hold $250 million in secured loans, joined two groups of junior lenders who told a judge that for creditors’ sake the auction should be more than a “walk hand in hand” with one favored bidder who is also a big lender and shareholder. Ten potential bidders are weighing whether they can compete with Standard General, a committee of junior lenders said in a court filing Wednesday.
“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, Delaware.
Competitors won’t even know how much to offer to top Standard General’s bid, or which stores RadioShack might take out of the package that’s for sale, because those details aren’t disclosed, Cerberus and Salus said. They added that the $8 million in fees and expenses promised to Standard General are also deterring potential buyers.
The defunct retailer has reserved the right to exclude any stores it wants until after the bids are all in. Its program is also drawing a raft of objections from real estate firms.
Standard General, arranger of a big RadioShack borrowing before bankruptcy, 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. Standard General’s role is part of the probe.
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 e-mailed statement Thursday.
The creditor committee has support from Wilmington Trust, which said Wednesday the hedge fund’s claim on assets was debatable and 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.”
The Fort Worth, Texas-based retailer still seeks to get fast approval for its store auction. It came to bankruptcy court with a deal to sell 1,500 to 2,400 stores to Standard General, which has a pact with wireless carrier Sprint to set up shop in as many as 1,750 locations. Most of the rest will be closed.
The case is In re RadioShack Corp., 15-10197, U.S. Bankruptcy Court, District of Delaware (Wilmington).