RadioShack to Launch First Wave of Store-Closing Sales

RadioShack to Launch First Wave of Store-Closing Sales

Retailer Said in Bankruptcy Court It Couldn’t Afford to Lose a Weekend of Sales

By Peg Brickley in the Wall Street Journal

This weekend will see the start of a final round of sales at 1,700 RadioShack stores, the first wave slated for liquidation as the consumer-electronics retailer tries to cut down its chain in Chapter 11 bankruptcy.

Judge Brendan Shannon authorized the beginning of store closure sales Friday, less than 24 hours after the Fort Worth, Texas, company sought bankruptcy protection in U.S. Bankruptcy Court in Wilmington, Del.

RadioShack argued it couldn’t afford to lose a weekend of liquidation sales, especially with consumers geared up to find bargains and creditors anxious for cash.

With a fight over its bankruptcy financing brewing, RadioShack brokered a deal that will allow it to spend its cash over the weekend, as it launches a double-barreled restructuring strategy. While 2,100 stores have been marked for liquidation, RadioShack is attempting to sell off the remaining retail outlets, saving part of the business.

Judge Shannon granted interim authority for cash use, closing sales and other emergency measures at RadioShack’s bankruptcy court debut, but warned no final court orders will be signed until unsecured creditors have had their say over the company’s strategy. Bondholders owed $330 million, trade creditors owed $124 million, and landlords owed $30 million, for openers, will form ranks over the coming week to weigh in formally on RadioShack’s future.

RadioShack’s bankruptcy filing Thursday followed years of sliding sales and uncertainty about the fate of the aging chain, which pioneered selling technology to consumers but was overtaken by new industry players.

One of those players, wireless provider Sprint Corp. , could be the key to a salvage operation for some 1,750 RadioShack stores. An alliance agreement with Sprint, which is being put into final form, will be available to any buyer of RadioShack outlets that the wireless provider finds acceptable.

RadioShack is expected to return to bankruptcy court for a debate over whether it needs to sign up for $285 million worth of Chapter 11 financing, under an arrangement that lender Cerberus Capital Management says is pricey and unnecessary.

Sprint has agreed to operate stores-within-stores for hedge fund Standard General, which is the proposed opening bidder at auction where RadioShack will invite competing offers. The deal isn’t exclusive, though, and Sprint can extend the alliance opportunity to any bidder.

“More than 10” potential bidders have signed up to review the data in confidence and will weigh whether to make a bid for RadioShack outlets, a company lawyer told the judge at Friday’s court hearing.