The bankruptcy court overseeing the Chapter 11 proceedings of RadioShack has approved the sale of 1,723 of the company’s stores to General Wireless, an affiliate of Standard General, according to a report from Bloomberg News.
As reported, in October 2014 Standard General, along with certain other investors, acquired the company’s then outstanding credit agreement loans under a $535 million asset-backed revolver from GE Capital pursuant to a loan sale agreement. Among other things, that transaction converted $275 million of the outstanding debt into a term loan.
An auction for the bulk of the RadioShack stores was completed late last week, and while the company declared General Wireless the winner, Salus Capital, the lender under RadioShack’s $250 million second-lien term loan placed in December 2013, challenged approval of the sale on the grounds that it had made a superior offer for the company.
As reported, General Wireless was the stalking-horse bidder for the stores with a bid valued at $145.5 million, comprised of $117.5 million in the form of a credit bid of the credit agreement loans, $18.6 million in cash, and $9.4 million in assumed liabilities.
Subsequently, during the auction the General Wireless bid was amended to reduce the credit bid portion to $112 million (reflecting a dispute with Salus over the extent to which the intercreditor agreement controlling RadioShack’s debt would limit Standard General’s ability to credit bid its claim) and the cash component to about $16.4 million, but the bid was augmented by certain payments from Sprint (which, as reported, had previously agreed in principal with General Wireless to establish a new dedicated mobility ‘store within a store’ retail presence in the acquired stores).
Ultimately, court papers show, the company valued the General Wireless bid at about $158 million.
In seeking to stop the deal with General Wireless, however, Salus argued that its competing bid, made in conjunction with a joint venture of liquidators led by Hilco, was superior to the General Wireless bid. Salus argued that its bid would provide the company with roughly $272 million in cash, but the company called this a “falsely labeled” bid, and noted that it included about $129 million in uncertain litigation proceeds that might not ultimately be paid.
The company said Salus refused to backstop or otherwise assure payment of the $129 million included in the bid in case the litigation failed to provide the hoped-for proceeds, and as a result the company did not include it in its calculations valuing the competing bids. As a result, the company said, it valued the General Wireless bid $74 million higher than the Hilco/Salus proposal, and $23 million higher than a third bid received from the Hilco venture based solely on liquidation of the company’s assets.
The sale hearing, which began on March 26, lasted four days.
Despite all the sturm und drang associated with the competition for the RadioShack assets, at the end of the day it would appear to mean little for the company’s creditors, most of whom were destined to see a minimal, if any, recovery regardless of who was declared the winner.
That said, the General Wireless bid is a benefit to thousands of the company’s employees who will still have jobs at the 1,723 RadioShack locations that will survive. – Alan Zimmerman