(Recasts with adjournment until Friday)
By Tom Hals
WILMINGTON, Del., March 26 (Reuters) - A deal to keep 1,740 RadioShack Corp stores open hangs in the balance in a Delaware court after its top creditor, a losing bidder in an auction for the bankrupt retailer, called the process a "sham" and demanded a new sale.
RadioShack, which filed for bankruptcy last month, told a U.S. Bankruptcy judge it had selected the Standard General hedge fund as the winning bidder in the private four-day auction, which ended just before a court hearing on Thursday.
Standard General plans to operate most of the stores in conjunction with wireless phone company Sprint Corp.
While RadioShack's attorney told the court the deal saved 7,500 jobs and was $23 million more than a bid by liquidators, the deal included less than $40 million in cash, according to court testimony.
The hearing to approve the agreement quickly deteriorated into disputes among lenders over the complex agreements that governed the repayment among creditors.
An attorney for Salus Capital Partners, which is owed $150 million and is RadioShack's largest creditor, blasted the auction process and demanded it be reopened.
"It's a charade, judge," Salus' attorney, Jay Goffman, told the court.
Goffman said there was little activity during the auction, and Standard General did not attend much of it. "We know a sham when we see one."
Salus said in court papers it had bid $271 million in cash, although about $129 million depended on the lender winning a legal dispute.
David Kurtz, an investment banker from Lazard who ran the auction, told the court Salus never responded when asked to top Standard General's bid.
Most of the five-hour hearing, which was adjourned until Friday, focused on complicated agreements that lenders negotiated among each other and how the auction was conducted. The lenders sparred over the question of whether those agreements allowed Standard General to pay for its proposal by forgiving some debt, a process known as credit bidding.
Judge Brendan Shannon cleared his schedule through Monday to hear testimony to help determine if the sale to Standard General should be approved.
RadioShack entered Chapter 11 bankruptcy in February with more than 4,000 stores, most of which have been closed.
Founded in 1921, the chain was once the go-to retailer for electronics, but became increasingly irrelevant in the digital age.
The case is In Re: RadioShack Corp, U.S. Bankruptcy Court, District of Delaware, No. 15-10197 (Reporting by Tom Hals in Wilmington, Delaware; Editing by Tom Brown)
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