RadioShack Reorg Clears First Court Hurdle
On Thursday, RadioShack received word that it’s Chapter 11 bankruptcy plan cleared a preliminary court review, allowing the company to move forward with its strategy to reorganize and save a small portion of the company.
According to the Wall Street Journal, that plan hinges largely on the independent CE retail community. In its outline, RadioShack explained that the reorganized company will be composed of online operations, that major network of independent dealers, and somewhere between “zero and 28” company-owned brick and mortar retail locations.
RadioShack entered chapter 11 back in March, marking the second time in two years that the company has filed for bankruptcy. Less than 30 company-owned stores remain in operation, which is down from more than 4,400 prior to its first bankruptcy filing in 2015.
Judge Brendan Shannon of the U.S. Bankruptcy Court in Delaware set an October 25 hearing for confirmation of the chapter 11 plan for the company.
Final approval, it appears, hinges on the outcome of a lawsuit that RadioShack filed against Sprint back in June.
During its first restructuring plan and as part of its cost-cutting efforts, RadioShack teamed up with Sprint to co-brand stores, giving a dedicated portion of each location to Sprint, where the wireless carrier could operate semi0independently. However, in the June lawsuit, RadioShack’s creditors claimed that Sprint neglected its contractual obligations to provide inventory and staff to those RadioShack stores, and instead opened 200 competing stores. The creditors are seeking $500 million in damages.
The litigation against Sprint would be the primary source of recovery for vendors, suppliers, and other unpaid creditors, according to RadioShack’s chapter 11 plan.