By Peg Brickley
The RadioShack trademark and the rest of the intellectual
property trove of the electronics retailing pioneer is going up for
auction Monday as efforts continue to gather cash for
creditors.
Loaded with debt, RadioShack filed for chapter 11 bankruptcy in
February and scrambled to shut down or sell off stores. Company
spokeswomen Merianne Roth confirmed Thursday that qualified bids
were received by a court-set deadline, so the auction will go off
as scheduled.
Had no bids been received, the company and its creditors would
have been forced to find a new way to transform RadioShack's
battered reputation as a technology retailer into cash.
RadioShack's brand and associated intellectual property have
attracted significant attention, David Peress, adviser to the
company, testified at a bankruptcy court hearing earlier this year.
Failed brick-and-mortar companies like Sharper Image have enjoyed a
successful life-after-bankruptcy-liquidation online, and the
RadioShack brand and customer list could be enough to launch a new
business.
One of those paying close attention to the auction is Standard
General LP, the hedge fund that saved more than 1,700 RadioShack
stores from closing and launched a revival in an alliance with
Sprint Corp. Standard General said it would make an offer on the
name and some of the other assets, but signaled that it is ready to
move on without the iconic brand if the price gets too high.
Salus Capital Partners, which sits behind Standard General in
the rankings of RadioShack lenders, has $150 million tied up in the
bankruptcy, and prime claim on the name and other intellectual
property. Auction rules give Salus until Friday to say whether it
is going to "credit-bid" on the intellectual property, meaning bid
by offering to cancel some of the debt RadioShack owes.
Also interested, but not bidding, are the attorneys general of
several states, who weighed in with warnings that RadioShack's
customer list not be mishandled in the bankruptcy sales process.
RadioShack promised customers it wouldn't rent or sell the data,
and the law preserves the bulk of that pledge, even in
bankruptcy.
The network of dealers that have been selling RadioShack goods
in small-town America, some of them for decades, will have
representatives at the auction. Their arrangements with RadioShack
are included in the intellectual property parcel that is going
under the gavel.
In court papers, an ad hoc committee of dealers asserted its
members have the right to continue using the RadioShack trademark
that was licensed to them, even if someone buys the name, but
leaves the dealerships behind.
At one point in earlier court proceedings, Standard General said
it might offer as much as $20 million for the RadioShack
intellectual property. Mr. Peress, adviser to RadioShack, said
marketing efforts had generated talks with unnamed major companies
interested in the brand. Due to the complexity of the deal,
RadioShack's advisers haven't ventured to make an open guess at
what price the intellectual property might bring.
Investors have been known to buy well-known brand names out of
bankruptcy and launched online retailing operations leveraging the
goodwill of shut-down brick-and-mortar chains. That is what
happened to gadget seller Sharper Image and women's clothing
retailer Coldwater Creek. Sharper Image's brand fetched $33
million.
Ideally, the buyer will take both the RadioShack brand and the
contracts with operators of more than 700 stores in the U.S. that
have been selling RadioShack goods, said lawyer Richard Mikels, who
represents the ad hoc deal committee.
RadioShack's troubles have been hard on the dealers, he said.
Their credit was cut off due to the bankruptcy, and dealers have
struggled to get the proper mix of products to keep their shelves
stocked.
"It's not a great situation," Mr. Mikels said.
Write to Peg Brickley at peg.brickley@wsj.com
Access Investor Kit for RadioShack Corp.
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=US7504381036