RadioShack files Chapter 11 but brand to live on in deal with Standard General and Sprint

Fort Worth, Texas -- In an expected move, longtime-struggling RadioShack has filed for Chapter 11 bankruptcy protection, listing assets of $1.2 billion and total debt of nearly $1.4 billion. The 94-year-old retailer filed after it reached a deal to sell 1,500 to 2,400 of its 4,000 company-owned U.S. stores to a newly formed entity (General Wireless) of its biggest shareholder, hedge fund Standard General. Under an agreement with Standard General, Sprint Corp. will set up shop in-store mobility departments in up to 1,750 of the acquired RadioShack stores.



Sprint will take up about one-third of each RadioShack store, selling "mobile devices across Sprint’s brand portfolio as well as RadioShack products, services and accessories," Sprint said in a statement. The stores will be co-branded with Sprint being the primary brand on storefronts and in marketing material.



“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,” said Sprint CEO Marcelo Claure. “Sprint and RadioShack expect to benefit from operational efficiencies and by cross-marketing to each other’s customers.”



RadioShack will continue to operate business as usual throughout the Chapter 11 process.



As stalking-horse bidders, Sprint and Standard General will have to compete with other companies in a court-supervised auction. The remaining RadioShack stores will then be closed.



RadioShack’s 1,000-plus dealer franchise stores in 25 countries along with stores operated by its Mexican subsidiary and its Asia operations are not included in the Chapter 11 filing or the related agreements. The company said that discussions are underway with interested parties to sell all of its remaining assets.



The retailer also said it has filed a motion with the bankruptcy court to proceed with the closure of the remaining company-owned stores under an agreement with Hilco Merchant Resources, with list of the stores slated for closure to be posted in the near future.



In a short statement, RadioShack CEO Joe Magnacca said: "These steps are the culmination of a thorough process intended to drive maximum value for our stakeholders."



RadioShack's bankruptcy follows 11 consecutive unprofitable quarters as the company worked to turn around its old-fashioned, stodgy image and gain traction with tech-savvy consumers. It closed stores and reduced headcount, updated its logo and debuted an updated store environment in select locations heavy on interactivity and brand names. But its losses mounted, and, importantly, its vendors started to lost confidence that the chain could reverse its fortunes.



“RadioShack's operating losses have been well documented, which has caused many vendors to alter their relationships with the company," CFO Carlin Adrianopoli said in a court statement.