Updated! Fort Worth, Texas – RadioShack has filed for Chapter 11 bankruptcy protection in a pre-packaged plan to sell upward of 2,400 of its stores to majority shareholder and lead lender Standard General.
Under the plan, General Wireless, a newly created Standard General affiliate, would acquire between 1,500 and 2,400 of the chain’s company-owned stores.
As many as 1,750 of those locations would be co-branded with Sprint and would feature dedicated store-within-a-store Sprint shops, while about 350 stores would continue under the RadioShack badge, a Sprint spokesperson told TWICE.
The carrier indicated that more than 1,100 of the stores would be Sprint owned, more than doubling its current store base of over 1,100 locations.
Sprint would operate and staff the in-store shops, which would occupy about a third of the sales floor, and will use the format to sell its pre- and postpaid mobile plans and devices, it said.
The stores would also sell RadioShack products, services and accessories, although Sprint would be the primary brand on storefronts and in marketing materials, the carrier noted.
The co-branding effort is expected to be in place by the back half of the year, the Sprint spokesperson said. But it is unclear what role RadioShack branding, management, merchandising or sourcing might play in the new retail chain.
In a statement, Sprint CEO Marcelo Claure said the deal would allow the carrier “to grow branded distribution quickly and cost-effectively in prime locations, and that the two brands will benefit from “operational efficiencies and by cross-marketing to each other’s customers.”
According to the Chapter 11 filing, Sprint is the retailer’s second largest unsecured creditor, owed just north of $6 million. The carrier was the chain’s first, and for a time, exclusive cellular service in the 1990s, when it also maintained in-store branded shops.
The balance of RadioShack’s remaining 4,100 company-owned stores – up to 2,100 of its least productive locations – have been unable to find a buyer and will be shuttered following a fire sale conducted by liquidators Hilco Merchant Resources, Gordon Brothers Retail Partners and Tiger Capital Group.
RadioShack started its own two-phase inventory liquidations in about 1,000 underperforming stores beginning last October, the company revealed in its filing (see link below).
The fire sales are expected to continue through the end of March.
Discussions are also being held with parties interested in acquiring the company’s remaining assets, RadioShack said.
Not included in the Chapter 11 filing are the more than 1,100 dealer-franchised stores located across 25 countries; stores operated by RadioShack’s Mexican subsidiary; and the company’s operations in Asia.
“These steps are the culmination of a thorough process intended to drive maximum value for our stakeholders,” said beleaguered CEO Joe Magnacca.
The sale is subject to the approval of the U.S. Bankruptcy Court in Delaware, and other parties will have an opportunity to bid for RadioShack’s assets.
In the meantime, the company has secured about $285 million in debtor-in-possession financing (DIP), plus up to $20 million in incremental borrowing capacity, from its current asset-based lender group led by DW Partners, which will fund operations during the sale process. RadioShack has filed first-day motions with the court to allow it to pay employees and continue to conduct business.
Besides Sprint, other top ten unsecured creditors include Assurant, owed $4.1 million; Verizon Wireless, owed $2.9 million; Federal Express, owed $1.5 million; and MagicJack, owed $1.3 million.
RadioShack said vendors will be paid in full under normal terms for invoices provided from Feb. 6 on. Vendors who have not received payment for goods or services provided before Feb. 6 will need to submit a proof of claim.
The company has set up a FAQ page for vendors with links to its claims agent’s site and other important contact information.
In its filing, RadioShack reported assets and liabilities each in excess of $1 billion, and 2013 full-year sales of $3.4 billion. – Additional reporting by Joseph Palenchar