Any business executive worth her salt will admit that timing is everything in business. Launch a product before consumers are ready to try something new or enter a market after the niche is saturated and even the best business plan is unlikely to see you through. The ongoing RadioShack bankruptcy is a good illustration of this concept from a Chapter 11 perspective.
Bankruptcy is business, and frequently it is the business of “just getting it done.” Show up too late in the process or fail to juggle every one of the multitudes of balls in the air in a complex Chapter 11 and you may lose the few options available. The juggling is going fast and furious in the case of RadioShack’s Chapter 11 in Delaware. As you may recall, the Shack filed on February 5 seeking a quick sale of most of its assets, with an affiliate of existing lenders acting as the “stalking horse bidder” subject to higher and better bids.
What sounds simple in the blogosphere is actually a lot more complicated and is as much about timing as anything. When RadioShack filed, it also asked the Bankruptcy Court for authority to borrow up to $20 million in “Debtor in Possession Financing” from its prior lenders, on what many bankruptcy practitioners would consider favorable “roll up” terms. As part of that motion, RadioShack sought to insert a provision in the financing order that would prohibit any party from challenging the security interests of the lenders. The motion was granted over the objection of the Official Committee of Unsecured Creditors and others, but as is common in such orders, the Court gave the Committee (or other parties with standing) just about 60 days to file a challenge to the lenders’ position (i.e. about April 14). Continue Reading