RadioShack committee reaches settlement of claims against ABL lenders

By Kali Hays

New York, July 22 – RadioShack Corp.’s official committee of unsecured creditors is seeking approval of a settlement with the company’s first out lenders and lender agent Cantor Fitzgerald Securities, according to a Tuesday motion filed with the U.S. Bankruptcy Court for the District of Delaware.

The first out lenders, related to RadioShack’s pre-bankruptcy ABL credit agreement, are funds managed by BlueCrest Capital Management (New York) LP, DW Partners LP, Macquarie Credit Investment Management Inc., Mudrick Capital Management, LP, Saba Capital Management, LP, T. Rowe Price Associates, Inc. and Taconic Capital Advisors LP.

According to the committee, several of the first out lenders sold credit default swap protection on RadioShack’s bonds in October 2014 betting that the company would not default on its bonds before Dec. 20, 2014. The company did not default before Dec. 20, but the committee said that RadioShack paid $31.8 million in connection with the October transaction.

In April, the committee notified the lenders and the agent of potential claims and challenges against the parties, including federal and state fraudulent conveyance, aiding and abetting breach of fiduciary duty and restitution and/or unjust enrichment.

Under the proposed settlement, the committee and RadioShack agreed to drop all potential claims against the lenders, and the lenders agreed to support any Chapter 11 plan, to not seek any recovery related to any RadioShack property or assets or indemnification claims and to seek recovery related only to reserves that the lenders are entitled to in the ABL credit agreement.

Though the committee said it “may have successfully litigated” its claims against the lenders, the outcome was “far from assured” and that the settlement is reasonable and will be beneficial to the estate.

A hearing to consider the settlement is set for Aug. 17.

RadioShack is a Fort Worth, Texas-based technology retailer that filed for bankruptcy on Feb. 5. Its Chapter 11 case number is 15-10197.

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