RadioShack Creditors Sue Sprint, Accuse It Of Destroying 6,000 Jobs

Just over two years ago, venerable but bankrupt electronics chain RadioShack cut a deal with mobile carrier Sprint to save thousands of jobs and keep 1,740 stores that were formerly part of RadioShack open. Only the unsecured creditors in RadioShack’s second bankruptcy now accuse its pal Sprint of using information from the contract to open hundreds of stores near the strongest RadioShack locations, dooming the reborn RadioShack..

Reuters reports that in a lawsuit filed in Delaware state court, the committee of unsecured creditors in this 2017 bankruptcy accuses Sprint of breaching its contract with RadioShack, not providing the phone inventory and employees that were part of the contract that the two companies signed to create the SprintShacks.

Instead, the unsecured creditors allege, Sprint used information it obtained from the deal with RadioShack to learn which locations were the “best” ones, then opened its own stores near those Shacks. The unsecured creditors committee accuses the carrier of opening 200 stores meant to take business from high-grossing RadioShacks.

The unsecured creditors are seeking $500 million in damages from Sprint, accusing it of destroying RadioShack and 6,000 jobs. These creditors also lost the money that they loaned to the company.

A Sprint spokesman told Reuters that the company plans to defend itself against these accusations “vigorously,” and that it is “disappointed by the creditors’ committee action.”

Like people, businesses have two kinds of debt: The kind backed up with collateral that the lender can take back (like real estate or merchandise) and the kind that isn’t. Holders of secured debt (the kind with collateral) get to line up first in bankruptcy proceedings, and unsecured creditors get what’s left.

At the time the new version of RadioShack was created, other lenders objected to the acquisition of the RadioShack business from General Wireless, complaining that hedge fund Standard General was able to use the company’s debt as currency in the bankruptcy auction instead of cash, which would have won back more money for other creditors.

It took a year to get the stores up and running and full of merchandise again, with executives noting at the time that they had to remind people that the chain even still existed.