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RadioShack Deal Could Fall Through: Judge

Wilmington, Del. – A federal bankruptcy court judge warned yesterday that a deal to keep more than 1,700 RadioShack stores open could be derailed by disputes between lenders.

At issue are threatened lawsuits involving a group led by term-lender Salus Capital Partners, and another lender group led by Standard General, the hedge fund and top RadioShack investor that won the stores at auction last week, Bloomberg News said.

Both sides are bickering over who might be shielded from any potential judgements and how much should be set aside from the sale of the company to cover them.

Salus wants to use its lawsuit proceeds to buy out the retailer, while Standard General plans to pay for the chain by forgiving its loans, leaving creditors out in the cold.

On the third day of hearings Judge Brendan Shannon expressed exasperation over the case, warning that Standard General “may end up with a sale order it cannot do a lot with,” Bloomberg reported.

Shannon said he was reluctant to allow the chain to be liquidated – the fate that awaits it under the plan by Salus and its partners – but “if that is the way this case needs to turn out, that is how it will turn out.”

That scenario isn’t the best choice for stakeholders, he said, and added that he will use “whatever authority and power I have” to achieve a “fair and appropriate” resolution.

The hearings enter day four here this morning.