UPDATE: RadioShack exits bankruptcy, again
- UPDATE: RadioShack won court clearance last week to exit its second trip to bankruptcy court since 2015. The restructured electronics retailer will exist primarily online and through its dealer network, according to the company's reorganization plan.
- RadioShack's operator, General Wireless Operations, plans to hold on to the company's warehouse, e-commerce site and dealer network operations, and just a handful of company-owned stores — up to 28 — according to court documents. The pared down RadioShack expects to generate gross revenue of $12 million in 2017, $15 million in 2018 and $17.5 million in 2020, the company said in a court filing last year. On exit, RadioShack's debtors — specifically, its second-lien lenders — will own the company in its entirety, according to court filings.
- The retailer will hold about $23 million in remaining debt, issued through new second-lien notes and secured by the company's remaining assets. According to Law360, an attorney for RadioShack told a judge at a hearing in October that it will create a litigation trust to pursue claims against Sprint, a partner in a co-branding partnership that RadioShack alleges failed to live up to its part of the deal. In December, former RadioShack employees sought class certification to sue their former employer for mass layoffs amid store closures, according to Law360.
Once a mecca for do-it-yourselfers, RadioShack's second bankruptcy will leave its storefront presence all but nonexistent.
The company entered Chapter 11, for the second time, in March with about 1,300 stores and immediate plans to close about 200. That was down from the 4,400 stores, with some 21,000 employees, the retailer operated when it filed for bankruptcy the first time. The company emerged from bankruptcy two years ago as a private company through a sale to hedge fund Standard General.
CEO Dene Rogers blamed poor performance of mobility sales for thwarting further progress for the retailer. RadioShack also failed to find any way to dent the increasing dominance of Amazon, which accounted for 90% of the $5.6 billion growth in U.S. consumer electronics in 2015, according to Deutsche Bank. At the time of the March bankruptcy announcement, RadioShack was reported to be in talks with Sprint, which helps run about a third of its brick-and-mortar operations in co-branded stores, to evaluate its options for stores.
That relationship has soured, at least in court. Creditors of RadioShack alleged in a lawsuit this summer that Sprint used confidential information from their in-store partnership, forged amid RadioShack's 2015 bankruptcy and reorganization, to open its own competing mobile phone stores, according to Reuters.
The lawsuit also accuses Sprint of failing to make good on obligations to provide inventory that were part of the deal, according to Reuters. RadioShack creditors said Sprint's actions led to nearly 6,000 lost jobs as the company closed its stores during bankruptcy. The suit initially asked for $500 million in damages. A Sprint spokesperson told Retail Dive in a July statement, "We're disappointed the creditors' committee took this action, and we expect to defend the matter vigorously."
The deal with Sprint was supposed to give RadioShack a lifeline and mobile products inventory while providing Sprint access to RadioShack's broad real estate footprint and well-known electronics name. It was key to the restructuring plan working and the deal's failure led to a second filing, according to the retailer.
RadioShack is just one of a handful of retailers with the dubious distinction of having made their second trip to bankruptcy court recently. The list also includes American Apparel, Wet Seal and Eastern Outfitters. As we've seen this year, retail bankruptcies can have a wide range of outcomes — but liquidation is historically the most common result.
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