The RadioShack auction moves into a second day today in New York, as the company and its creditors debate the value of the bid from big lender Standard General LP, the Wall Street Journal reported today. Standard General’s takeover proposal would keep the iconic retailer in operation, in trimmed-down form, and estimates are that it’s worth at least $20 million more than a potential counterbid from a joint venture of liquidators. The problem for RadioShack is that Standard General is bidding mostly by offering to cancel loans it made to the company, and creditors have questioned the validity of those loans. What’s hanging up the auction is not a profound legal debate over the fine points of lending to failing companies — it’s timing. Unsecured creditors owed an estimated $500 million have until approximately the second week in April to decide whether they want to sue Standard General to challenge the loans. Given the load of senior debt on the company, those creditors may get little or nothing out of the auction, and can’t afford to walk away from a potentially viable lawsuit. RadioShack needs a sale by March 31 to avoid running up another month’s worth of rent payments. Standard General says it won’t close a takeover deal until its RadioShack loans are recognized as valid.
