What is the purpose of auctioning off the assets of a company that has declared bankruptcy? Is it to keep some form of the company in business to keep workers employed, or is it to raise as much money as possible for creditors in order to make a dent in their losses? That’s the question in RadioShack’s bankruptcy auction. Bids are supposed to be finalized today, and there are two competing high bids: one that will keep a large number of stores open, and one that will raise cash for lenders.

Standard General has been the presumed winner until now, and their joint venture with Sprint would keep about 1,700 stores open as some form of RadioShack, which would be co-branded as Sprint stores to instantly expand Sprint’s retail footprint. Standard General argues that this move would preserve 9,000 retail jobs. The problem with this bid is that most of what Standard General is bidding with is RadioShack’s own debt to the company, and they’re only offering $16.4 million in cash. That’s great for Standard General, but less great for other lenders that RadioShack owes money.

Like Salus Capital, a lender that has has teamed up with three of our favorite retail liquidators: Hilco, Gordon Brothers, and Tiger Capital. Together, these companies have put together a higher cash bid so that more of the lenders can share at least something. The presence of so many well-known liquidators makes it clear what this group’s plans are for what’s left of the company, though.

It doesn’t matter how much money a resurrected RadioShack makes, since the new and smaller venture will be a separate entity free of the debt that led the current RadioShack to file for bankruptcy. That’s why you needed to use your old RadioShack gift cards before March 5.

RadioShack Buyer Sees Rescued Jobs, Creditor Fears Losses [Bloomberg]

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