RadioShack successfully navigates contentious bankruptcy sale
Client(s) RadioShack Corporation
Jones Day represented RadioShack Corporation, the century old, iconic American retailer as lead restructuring counsel in chapter 11 cases filed in Delaware bankruptcy court on February 5, 2015. Due to limited liquidity and widespread creditor opposition, RadioShack was forced to fight for its life in an exceedingly compressed timeframe. With Jones Day's assistance, RadioShack sought to immediately establish a multi-track process that included a going concern sale of a majority of its assets, a store closing and inventory liquidation process for stores that would not be part of the going concern, and a process to sell the leases for the stores that would be closed. In each case, the goal was to proceed as quickly as possible and, in the case of the going concern sale, the lenders required that RadioShack close the sale in less than 60 days. In fact, with Jones Day's assistance, RadioShack conducted a four-day auction, navigated a four-day contested sale hearing, and obtained court approval of a sale of the leases, inventory and fixed assets at more than 1,700 stores to an affiliate of private equity firm, Standard General, for approximately $150 million on March 31, 2015. The sale, which included entry by the buyer into an alliance agreement (providing for a store within a store concept) with Sprint, which Jones Day also helped negotiate and document, closed a day or two thereafter. The sale was approved over numerous objections by individual creditors or creditor groups who attacked, among other things, the structure of the private equity-backed purchase offer and the sufficiency of the sale process. This going concern sale preserved the business and approximately 7,000 RadioShack jobs.
Jones Day later helped RadioShack with the sale of its U.S. intellectual property, sourcing operations, and limited categories of customer data. After an extended auction involving a number of bidders, RadioShack agreed to sell the assets for $26.2 million to Standard General. That sale was approved by the Bankruptcy Court after a contested hearing on May 20, 2015. A number of parties, including attorneys general in Texas and 37 other states, had objected to the proposed sale of customer data, which was critical to the value of the RadioShack brand. Following a daylong mediation session, a deal was reached that resolved the privacy concerns and permitted RadioShack to sell email addresses provided by customers during the past two years as well as certain transaction data. The settlement also provided customers with the right to opt out and restricts the buyer from selling or sharing any of the customer information, including with Sprint, its strategic business partner. This innovative settlement enabled RadioShack to preserve the iconic RadioShack brand domestically.
Further, the debtors sold (a) their Mexican retail business and related intellectual property assets for approximately $32 million, (b) certain intellectual property in Central/South America and the Middle East/North Africa in two transactions generating $6.5 million, (c) their owned real estate, which included distribution centers in Texas, Maryland, and California, at an aggregate price of over $50 million, and (d) inventory through store closing sales or in bulk that has generated over $145 million before expenses.
RadioShack obtained confirmation of a plan of liquidation, which included a resolution of hotly contested issues with respect to treatment of gift cards, on September 30, 2015 and the plan went effective on October 7, 2015. This was accomplished less than 9 months after RadioShack filed for chapter 11.