Boston, MA 11/27/2014 (wallstreetpr) – Radioshack Corporation (NYSE:RSH) is struggling for survival, but there appears to be very little for the company to cling on other than renegotiating financial agreements. In that manner, the company secured a commitment from one of its largest shareholders for a rescue deal that offers hope. Standard General LP agreed to surrender a portion of its potential stake in Radioshack in exchange for board seats, according to The Wall Street Journal.
If all goes well, such a deal will help Radioshack Corporation (NYSE:RSH) escape bankruptcy filing. However, Standard General will get for itself four positions in the board of the electronics retailer. Some of its representatives on the board will be independent directors, according to the rescue deal proposal. However, the hedge fund will give up 10% of its preferred shares in the company.
New board composition
The agreement also stipulates that the composition of the new board of Radioshack Corporation (NYSE:RSH). The board will have the CEO at the point of closing, four designees and independent directors that will be two in number.
Standard General owns 10.1 million shares in Radioshack, and the stake is equivalent to 9.8% equity interest in the electronic chain. According to Bloomberg, General Retail Holdings LP, an affiliate of Standard General, acquired loans of Radioshack last month.
Lenders object store closure
Radioshack Corporation (NYSE:RSH) has been out negotiating with investors for a financial rescue and the development regarding Standard General is a positive indicator. However, the company has also suffered setbacks in the hands of its creditors. Its attempts to shutter more than 1,000 stores this year failed when its lenders rose against the move. According to certain agreements, the company can only eliminate 200 stores without seeking the approval of lenders this year. The company operates over 4,000 in the U.S. and performance in the stores has not been good in the recent times.
Radioshack reported 20% sales decline in 3Q in its stores that were open for more than one year. Its overall revenue for the quarter took a hit, falling 22% to about $674 million. However, its losses soared to $137.4 million, almost double from the like quarter a year earlier.
Radioshack Corporation (NYSE:RSH) has been trading in red since September’14. The stock is currently trading below its 20-Day EMA of $0.88 with very flat volumes. The RSI of the stock stands at 42.45.