I estimate unsecured to recover 67% at best, and more likely 41%
I have not seen the full schedules out yet plus a lot of details are missing to make a precise estimate; however, using the November 1, 2014 balance sheet and my estimates of the best possible, I believe that unsecured creditors (including 2019 bonds) will recover, at best 67 cents on the dollar and probably much less since I used what I would 'miracle' financial results.
In simple, Nov 1, 2014 assets are 1,200 million. Liabilities are 1,387. Stockholders equity is a negative 187 million.
The press reports seem to indicate that Radio Shack holiday sales were not that good, and the 2013 season Radio Shack lost money in that holiday season also, of around $180 million. Assuming that this holiday season plus the time prior to the bankruptcy filing that a miracle happened and the company lost 'only' another $100 million. Since no one is lending any new money, assume the $100 million loss comes out of assets so my estimated balances sheet is as follows:
Assets 1,100 million
Liabilities 1,387 million
Stock equity (287) million
Assume another miracle happens, and the company in its 'fire sales' is able to realize the full value of the assets on its balance sheet and that the bankruptcy expenses are 'not that bad'.
Of the $841 million in long term liabilities, $325 million are the 2019 bonds that are unsecured, so the secured part is $516 million that has first claim on the assets. The unsecured $325 million is lumped in with the other unsecured liabilities for a total unsecured liabilities of $870 million. The assets are now about $583 million so recovery is $583/$870 or 67%, using best possible numbers. (I expect the result to be much worse.)
One thing I am not sure of at this time is if the bonds are in a class ahead of all the other unsecured liabilities or if they are in the same class as all unsecured liabilities. On the down side, the assets will probably not be liquidated for what they are being carried on the balance sheet. I would consider the company to be doing well if they took 'only' a 20% loss on the fire sale of assets. On the upside, it is still not clear what the store leases will go for in the sale/auction but that should be known before the end of the month.
I am expecting that the store leases will go for only about $3,000 per store. Even if all 4,000 stores got sold, that would only be $12 million.
If my expectations are correct and 20% of the assets are lost due to the fire sale, then $220 million in assets would be lost, but $12 million gained for a net additional loss of $208 million. That would make the recovery for unsecured $363/$870 or 41%.
Louis J. Desy Jr.
AI
