Wilmington, Del. – Liquidators began the first round of RadioShack store-closing sales this weekend after a federal bankruptcy court here fast-tracked the move on Friday.
In addition, the chain started shutting 200 locations on its own just prior to its Chapter 11 filing on Feb. 5, court documents show, which was the maximum number allowable annually under its term-loan agreement. The company had just begun its new fiscal year.
The day after the filing, Judge Brendan Shannon approved a motion to reject leases and begin fire sales immediately under the auspices of liquidators Hilco, Gordon Brothers and Tiger Capital, finding the action “necessary to avoid immediate and irreparable harm to the debtors and their estates.”
So far, 1,784 stores have been targeted for closure in three waves (see list, here), with the majority expected to close this month.
The first phase of fire sales is being held in 162 stores and will run through Feb. 17; the second phase, affecting 986 stores, will finish by Feb. 28; and the final phase of store-closing sales will be conducted in 636 locations and conclude by March 31.
As many as 2,100 company-owned stores may ultimately shutter, the chain indicated in its filing, although an A-list of 1,750 desirable locations would be acquired by lead lender Standard General and co-branded with Sprint under a prepackaged bankruptcy plan that still awaits court approval.
Ironically, embattled CEO Joe Magnacca spent much of last year lobbying term-lender Salus Capital Partners to allow a massive closure of unproductive stores. The move may have salvaged the company by reducing costs, trimming losses and freeing up capital, he argued, but Salus, whose loan was secured by RadioShack’s assets, repeatedly nixed the deal.
More clouded is the fate of the over 1,100 dealer-franchised stores operating in 25 countries, mostly in the U.S. According to Bloomberg, the independently-owned shops still have the legal right to bear the RadioShack brand under their franchise agreements, although the contracts could be voided under the bankruptcy or sold to a buyer, which could conceivably include the franchisees themselves.
Follow TWICE.com for continuing coverage of RadioShack’s reorganization.