S SentinelOne Inc

By Patrick Fitzgerald and Drew FitzGerald 

RadioShack owner General Wireless Operations Inc. filed for chapter 11 protection Wednesday night, the electronics retailer's second trip to bankruptcy court in as many years after a partnership with wireless provider Sprint Corp. failed to yield dividends.

The Fort Worth, Texas, company has already started closing roughly 200 stores and said it is "evaluating options" on its remaining 1,300 retail outlets.

The latest bankruptcy filing caps a long decline for the nearly 100-year-old brand that was once considered the go-to place for new technology.

"Since emerging from bankruptcy two years ago as a privately owned company, our team has made progress in stabilizing operations and achieving profitability in the retail business, while our partner Sprint managed the mobility business," chief executive Dene Rogers said.

However, the "surprisingly poor" performance of mobility sales, managed by Sprint, was among one of the main factors that led to the latest chapter 11 filing.

"While the retail business progressed, the Sprint relationship did not yield the benefits that the [General Wireless] anticipated," Mr. Rogers said in court papers filed Wednesday. He added that the reorganized company had worked on its retail business and pursued marketing partnerships with businesses including Amazon, Comcast, FedEx and Hulu.

RadioShack filed for chapter 11 bankruptcy protection in February 2015 and shut down or sold off almost all of its 4,000-store chain, trying to pay off more than $1 billion in debt.

Hedge fund Standard General, through its General Wireless affiliate, won a bankruptcy auction for RadioShack and sought to revive the brand around a streamlined array of necessities, to be sold alongside Sprint wireless products. Sprint allied with the hedge fund in keeping more than 40% of RadioShack's brick-and-mortar outlets open.

But the turnaround strategy never panned out. If mobile sales had picked up, Mr. Rogers said General Wireless would have been able to raise new capital, pay down debt and eventually become a financially stable company.

Instead, Sprint mobility sales "dropped off precipitously in the fourth quarter of 2016," which called "the original arrangement into question," Mr. Rogers said in court papers.

A Sprint spokesman said RadioShack's bankruptcy filing and subsequent store closings aren't material to Sprint's overall sales results. The company has reached a deal General Wireless to scrap their partnership and will convert several hundred Sprint-RadioShack outlets into Sprint corporate-owned stores. In return, Sprint will pay General Wireless $17 million under the settlement, which requires bankruptcy court approval.

In recent years, RadioShack has faced competition in the cellphone business from stores owned by wireless providers as well as handset makers like Apple Inc. The company has also felt pressure from online retailer Amazon.com Inc. as consumers migrated to online purchases of high-margin accessories, such as cables and batteries, that long fueled its business.

The company's capital structure includes roughly $25.5 million in first-lien term loans, nearly $40 million in junior-term loan, and a $23 million intellectual property loan. Additionally, General Wireless owes about $62.9 million to trade creditors of which roughly $52.6 million is owed to vendors and creditors and about $10.2 million is unpaid prebankruptcy debt.

The case, which was filed in the U.S. Bankruptcy Court in Wilmington, Del., is being handled by law firm Pepper Hamilton LLP. The case number is 17-10506.

Write to Patrick Fitzgerald at patrick.fitzgerald@wsj.com and Drew FitzGerald at andrew.fitzgerald@wsj.com

(END) Dow Jones Newswires

March 08, 2017 22:21 ET (03:21 GMT)

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