Can RadioShack Corporation (NYSE:RSH) Delay Bankruptcy Filing?

Steve Hackney - August 28, 2014

Boston, MA 08/28/2014 (wallstreetpr) – RadioShack Corporation (NYSE:RSH) is in need of capital infusion, in the absence of which it can face a cash crunch next year. It is in talks with shareholder Standard General for getting rescue financing package. Standard General owns 7% of RadioShack’s shares as of June 30, 2014. Since then, it has raised its stake to almost 10%.

The assistance

Standard General is known to save the troubled retailers. Recently, it committed around $25 million in capital to American Apparel Inc (NYSEMKT:APP). The assistance will include spending $10 million for purchasing Lion Capital LLP’s high-interest loan. Joe Magnacca, the CEO of RadioShack, is appointed on American Apparel Inc (NYSEMKT:APP)’s board to help the two retailers. MAgnacca is revamping the product lineup and remodeling the stores to attract consumers. However, RadioShack is left with less time to get required success in its endeavors. If it fails to get immediate help, it can face an imminent default. The cost of protecting against default has mounted to 60.5% upfront within six months.

The problem area

RadioShack Corporation (NYSE:RSH) is facing stiff competition from the e-commerce companies. The mobile-phone business is showing no signs of growth. It reported a loss of $98.3 million in the first quarter results. The same-stores sales declined 14% in the first quarter. Also, RadioShack was forced to close 200 stores at start of the year. The retailer wanted to shut down as many as 1,100 stores, but the creditors didn’t approve the plan.

The expectations

RadioShack Corporation (NYSE:RSH) is expecting its shareholder Standard General to infuse cash by issuing debt or equity. The priority is to get a plan that can help RadioShack avoid Chapter 11. Also, Standard General can refinance RadioShack’s second-lien term loan of $250 million, held by Cerberus Capital Management and Salus Capital Partners. Despite the financing and other rescuing plans, RadioShack will find it tough to get back on a growth path.

Avatar

Steve Hackney

Steve Hackney is a corporate finance professional with over 14 years of experience in cash management and investing. He earned a Bachelor of Science in Finance from Florida State University and holds a Certified Treasury Professional certification. Steve lives in Orlando, Florida with his family.

Leave a Reply

Your email address will not be published. Required fields are marked *

Sign Up To Get Our Latest Stocks Alerts