RadioShack Files For Chapter 11 Bankruptcy Protection

(RTTNews) - Beleaguered consumer electronics retailer RadioShack Corp. (RSHC) filed Thursday for bankruptcy protection after it reached a deal to sell up to 2,400 of its U.S. company-owned stores to an affiliate of New York-based hedge-fund Standard General LP, its largest shareholder. The sale agreement is subject to court approval and other conditions.

The Fort Worth, Texas-based 94-year old retail chain and certain of its U.S. subsidiaries have filed voluntary petitions for relief under Chapter 11 of the U.S. Bankruptcy Code in the U.S. Bankruptcy Court for the District of Delaware.

The move will enable the company to conduct an orderly sale of its remaining assets, for which discussions are already underway with interested parties. RadioShack currently has about 4,000 company-owned stores in the U.S.

"These steps are the culmination of a thorough process intended to drive maximum value for our stakeholders," RadioShack CEO Joe Magnacca said.

However, the company added that the stores operated by its Mexican subsidiary, and its Asia operations as well as more than 1,000 franchisee-owned stores in 25 countries are not included in the filing.

Meanwhile, the affiliate of Standard General, General Wireless, Inc., has teamed up with Sprint Corp. (S) for it to establish a new dedicated mobility "store within a store" retail presence in up to 1,750 of the acquired stores. This deal is also subject to court approval of the definitive agreement.

The deal will see the establishing of co-branded stores that will exclusively sell mobile devices across Sprint's brand portfolio as well as RadioShack products, services and accessories, with Sprint effectively operating a store within a RadioShack store.

Additionally, Radio Shack has filed a motion with the Court to proceed with the closure of the remaining company-owned stores under an agreement with Hilco Merchant Resources.

In order to provide it with liquidity and to fund their day-to-day operations during the bankruptcy and sale process, the company has secured a commitment for about $285 million in debtor-in-possession financing (DIP) from its current ABL lender group, led by DW Partners, LP.

Radio Shack has Jones Day as its legal advisor, while its investment banker is Lazard Freres, and its financial advisors are The MAEVA Group and FTI Consulting, Inc. (FCN).

Radio Shack has been trying hard to avoid a bankruptcy filing after running out of cash supply. The company has been striving to strengthen its balance sheet, cash supply and re-invent itself for the past few years. It has also posted eleven successive quarterly losses since 2011s, and had made it clear earlier that it is running dangerously low on cash.

In a December filing, Radioshack said it may have to file for bankruptcy unless it was sold, restructured, or received a major cash infusion. The company's total debt was $841.5 million at November 1.