A RadioShack lender on Wednesday asked the judge overseeing the company’s bankruptcy to intervene in the auction of company assets, alleging that a bid from hedge fund Standard General is “fundamentally flawed and unfair.”
In a filing made in U.S. Bankruptcy Court in Wilmington, Del., Salus Capital Partners claims that Standard General has submitted a series of bids over several weeks that “became progressively worse” and that its rival bid, submitted with a team of liquidators, would provide far more cash for creditors.
In a letter to Judge Brendan L. Shannon, the attorneys for Salus requested a conference before a hearing set for Thursday, at which the results of the auction were to be presented to the court and potentially approved. It says numerous legal issues need to be resolved before the auction bids can be fairly assessed.
On Tuesday, it appeared that Standard General had prevailed in a bid for the assets of the bankrupt electronics retailer, with a proposal to buy 1,723 RadioShack store leases, with inventory the retailer valued at $129.8 million. The hedge fund has said it has a deal with Sprint to take space in most of the stores and continue to operate them under a co-branding agreement.
In its court filing, Salus claims that the Standard General bid would include a cash contribution of only $16.4 million, compared to $271 million offered by Salus and its liquidation partners. Standard General would trade its debt for the stores, but Salus has challenged the amount of debt it has available to do so.
RadioShack and Salus have been fighting for several months.
Salus, a distressed lender from Needham Heights, Mass., says it’s acting as agent for lenders on a $250 million term loan made in 2013. Late last year, the lender claimed that RadioShack had defaulted on the loan through a financing deal made with Standard General last year. In December, RadioShack accused Salus of acting out of narrow self-interest and called its actions “wrong and self-serving.”
RadioShack filed for Chapter 11 bankruptcy protection in February.