Last week, it seemed like the bankruptcy auction for what’s left of RadioShack would be pretty straightforward. Standard General, one of the chain’s biggest lenders, would put up a small amount of cash and a large amount of their own debt to take over about 1,700 stores. Another lender called shenanigans on the whole sale, offering a cash bid and claiming that it was superior. Now the auction enters week 2.

As we explained last week, at issue here is the question of what a bankruptcy auction is for. Is the point to make sure that one lender gets compensated and that a different version of the brand lives on, or is it to sell off the company’s assets for as much cash as possible, then distribute the proceeds fairly to all of the company’s creditors? Another important question is how much debt owed to a bidder by the bankrupt company can be part of the bid.

Lenders that aren’t Standard General claim that the hedge fund is being allowed to put up far too much debt and not enough cash for the remains of the once-mighty retailer. The most vocal of these has been Salus Capital, which banded together with other junior creditors and lenders to make its own cash bid. RadioShack chose Standard General as the winner anyway, and Salus argued in bankruptcy court earlier today that “machinations and manipulation” involving bond trades have made this auction unfair, and Salus didn’t submit a new, higher bid this morning as expected. Instead, the company is continuing with its current bid

Salus Changes Mind About New Bid for RadioShack [Wall Street Journal]
Bidders ready for second week of action in RadioShack bankruptcy [Dallas Business Journal]

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