RadioShack pact isn’t ‘insider’ deal
RadioShack Corp.’ s biggest shareholder, which plans to buy many of the bankrupt electronics chain’s stores, said its deals with the company were negotiated at arm’s length.
Hedge fund Standard General LP, a lender as well as stockholder of RadioShack, responded Sunday in court papers to an accusation from funds managed by Cerberus Capital Management LP that its actions may be biased, as it has the status of an “insider” at the retailer.
RadioShack aims to get approval for a store auction plan later this month.
Cerberus, led by Stephen Feinberg, owns US$100 million of RadioShack’s bank loans. It originally tried to stop the retailer from borrowing more money from Standard General and other lenders, while warning a judge that the hedge fund’s bids for RadioShack stores might be influenced by its “de facto control” of the retailer.
RadioShack plans to sell 1,500 to 2,400 stores to Standard General, which has a deal with wireless carrier Sprint Corp. to set up shop in as many as 1,750 locations. Most of the rest will be closed.
“Neither Standard General nor any of its affiliates is a director, officer or general partner of RadioShack,” the hedge fund said in the filing.
Cerberus characterized the loan, which a judge has provisionally approved, as a device to funnel US$6 million in fees to creditors who would mostly recycle old money to the company. Fort Worth, Texasbased RadioShack didn’t need new money anyway, Cerberus said in a Feb. 6 filing.
According to Cerberus, all of Standard General’s conduct in the case “warrants close scrutiny.”
The hedge fund’s role in orchestrating RadioShack borrowing before bankruptcy put extensive powers in its hands, comparable to those of insiders. Standard General also is a “significant” secured lender and owns about 10% of the retailer’s stock, Cerberus said.
Another charge that Standard General is an insider came from Wilmington Trust, a trustee for unsecured lenders that said the hedge fund has “had access to confidential information and the debtors’ board of directors management and advisers for an extended period of time.”