Cooley’s Corporate Restructuring & Bankruptcy Group was selected as co-counsel by the official committee of unsecured creditors in RadioShack’s chapter 11 proceedings, which began on February 5, 2014. Quinn Emanuel will also serve as co-counsel to the Committee.
RadioShack, the perennially troubled consumer electronics retailer, filed for chapter 11 protection in Wilmington, Delaware with a plan to immediately liquidate and ultimately shut down up to 2,100 stores. The closure of a large number of RadioShack’s locations will come as no surprise to anyone who has been following RadioShack’s decline over the years. RadioShack has been generating significant operating losses for many years and management has been working to cut underperforming locations in an effort to turn around the struggling retailer. Last year, RadioShack’s management publicly called for the closure of over 1,000 stores, but RadioShack’s secured lenders limited the number of stores that the company could shutter to 200. These lender-imposed constraints do not apply in bankruptcy, so RadioShack is free to close as many stores as it deems appropriate to right-size its footprint to a sustainable level.
In addition to the store closings, the Debtors have proposed a sale of approximately 1,700 to 2,000 of the remaining stores to an affiliate of Standard General, a major equity owner and secured lender to RadioShack, along with an agreement with Sprint to operate a store-within-a-store in the go-forward locations. The proposed sale is subject to higher or better offers, but the Debtors are pushing a fast sale timeline with plans to consummate the sale by the end of the month. Cooley is assisting the Committee in ensuring a robust sale process, while also evaluating the merits of the Standard General bid.
Unfortunately, this case represents a significant challenge to the general unsecured creditors of RadioShack, whose claims sit behind a substantial amount of secured debt. Cooley and the Committee’s other advisors are working tirelessly to maximize the value of RadioShack’s assets in the sale process, and in the coming months will identify and pursue other potential sources of recovery for general unsecured creditors.