RadioShack Corp (RSH, Financial) has officially filed for bankruptcy under Chapter 11 of the U.S. Bankruptcy Code. The company along with a few of its U.S. Subsidiaries filed voluntary petitions for relief in the U.S. Bankruptcy Court for the District of Delaware. RadioShack Corporation is a franchise selling electronic items in the U.S formed in 1921. The company owns franchises in South America, Europe and Africa as well. With its headquarters located in Texas, the company was originally named as “Radio Shack.” Business was going on well until expansion plans started. After setting up nine stores and an extensive mail-order business, the company was in troubled waters. Radio Shack was almost bankrupt, but Tandy Corporation purchased the company in 1962. 1995 saw Radio Shack launching a new logo and subsequently, Radio Shack was renamed as "RadioShack" in CamelCase.
RadioShack was widely known for its high quality CB radios and the TRS-80. The TRS-80 was the first mass-produced PCs ever. This was their first big break. From thereafter, the company tumbled along the way. It put its foot down and flatly refused to sell products online. The company spent the past few years trying to find its roots in the digital world, but failed to do so. All they could manage was hanging on to the hope that they may return to their former glory.
Bankruptcy filing
After hanging on for so many years, through the financial distress, the company has officially revealed that they have filed for Chapter 11 bankruptcy on February 5, 2015. RadioShack did try its best to adapt in the digital age, but all its efforts were in vain since. RadioShack reported losses in the past eleven quarters and ran out of cash. The company will now sell up to 2,400 stores. RadioShack has signed an Asset Purchase Agreement with Hedge fund Standard General LP. Standard General became RadioShack's largest shareholder in 2014 and helped the company get through their financial crisis last year. Standard General will also partner with Sprint Corp. (S, Financial) to run around 1750 outlets. Rumors also report that Amazon.com Inc. (AMZN, Financial) may take over some outlets.
The above graph depicts the fall of RSH Stock. Besides a merger or a rollup, the company, evidently, didn't have any option other than filing for bankruptcy. After all, the company was behind the curve for the past few decades.
A few lenders led by DW Partners LP are ready to shell out $285 million in bankruptcy financing. This will give RadioShack around $20 million in borrowing availability. U.S. Bankruptcy Court in Wilmington, Del. has been asked to approve the request to tap liquidation firm Hilco Merchant Resources to close remaining stores.
Workers from RadioShack has been heard saying that the company directed them to clear out the location store by shipping smart-phones to stores nearby as well as reducing prices on the existing inventory. A plan was drafted last year by Standard General to pull out the company from trouble last October. However, cash refused to come in as suppliers and lenders did not budge from their decision to negotiate their agreements. The company tried to shut down 1,100 stores last year. However, due to a provision in loan documents, RadioShack could only close around 200 a year. Assets of $1.2 billion were declared and debts of $1.4 billion were listed in the bankruptcy petition. The company had around 50,000 and 100,000 creditors.
Earlier during this week, the NYSE suspended trading of RadioShack's shares. The New York Stock exchange also sought to delist the company. The remaining assets will soon be sold, according to sources. Joe Magnacca, the chief executive officer of RadioShack said that whatever steps the company is taking is towards obtaining maximum value for the stakeholders. RadioShack is currently working with Jones Day: legal adviser, Lazard Freres (LAZ, Financial) investment bank and The MAEVA Group and FTI,Ă‚ their financial advisers.
