After years of sluggish sales, RadioShack used their final straw and filed for Chapter 11 bankruptcy protection. In the published bankruptcy docket, the company has more than $1 billion in estimated liabilities. In the bankruptcy, RadioShack may come from it beaten but not destroyed. They already have plans to close nearly half of their 4,000 stores and another 1,500 of those stores are being sold to their largest shareholder, Standard General. In turn, Standard General would enter into an agreement with Sprint Corp. for the wireless company to occupy a third of the space within the purchased stores.
This can usher in the new age of RadioShack, with a renewed appeal. Sprint phones and accessories would grace a large portion of the store next to the everyday items of RadioShack.
It is possible additional RadioShack assets will be placed up for bid for other buyers. Prior to doing so they would need approval from a federal judge, once one is assigned to their bankruptcy case. In selling assets and having Standard General take over half of the stores, these moves can spare the retailer from wholly liquidating. This can permit the company to come out stronger, albeit smaller. RadioShack’s Asian operations, Mexican subsidiary and more than 1,000 dealer franchise stores are spared from the bankruptcy net.
During the restructuring process of the 1,500 stores, RadioShack will continue operations, with a scheduled loan of $285 million expected for approval. That still leaves a greater amount of employees left out in the cold, and unemployed. Already more than 175 stores have closed since the start of “the current fiscal year,” RadioShack reports. More stores are expected to close following the filing of the bankruptcy.
The once infamous electronics store has suffered straight 11 quarters of loss after loss, denting their assets and assessing high levels of liability.
Sprint’s CEO Marcelo Claure released a statement, “We’ve proven that our products and new offers drive traffic to stores, and this agreement would allow Sprint to grow branded distribution quickly and cost-effectively in prime locations. Sprint and RadioShack expect to benefit from operational efficiencies and by cross-marketing to each other’s customers.”