Joel R. Glucksman
Partner
201-896-7095 jglucksman@sh-law.comFirm Insights
RadioShack Considers Refinancing, Bankruptcy
Author: Joel R. Glucksman
Date: September 4, 2014
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Electronics retailing chain RadioShack is considering refinancing or even a bankruptcy filing to clear up its financial troubles, sources told The Street.
While the company appears to prefer the refinancing option, this may not be possible, the news source explained. The company’s financial troubles center around a $250 million second-lien term loan held by Salus Capital Partners LLC. Salus is apparently not pleased with RadioShack’s plan to close about 1,100 stores as part of a turnaround strategy. While this would help RadioShack cut costs, it would also reduce the collateral that backs Salus’ loan. This, in turn, would reduce the potential for Salus to recover on its loan should RadioShack declare bankruptcy. In response to Salus’ concerns, RadioShack has reduced the planned closures to just 200 stores.
Standard General, the hedge fund that is working to rescue American Apparel Inc., is also reported to be in talks with RadioShack about methods to raise money to avert a bankruptcy, according to The Columbus Dispatch. Data compiled by Bloomberg indicated that Standard General owns almost 10 percent of RadioShack’s shares as of Aug. 26, up from 7 percent on June 30.
“As tough a battle as it’s going to be to turn the business around, I won’t completely write them off yet,” Will Frohnhoefer, a special-situations equity analyst for BTIG in New York, told the news source. “The new capital could get them through the rough patch.”
RadioShack has experienced nine consecutive quarters of losses, including a $98.3 million deficit in the most recent quarter, ending May 3, Bloomberg data cited by The Dispatch showed. This is up from the $43.3 million losses one year earlier. If things were to continue along their present course, the retailer is expected to run out of cash in 2015.
RadioShack isn’t the only U.S. business in hot-water. Here are a few of my other posts regarding popular businesses, that you may know and love, that are also facing bankruptcy:
- Crumbs Cupcakes – Still In The Running
- Sbarro Successfully Exits Bankruptcy
- Carol’s Daughter Files For Bankruptcy
- Hostess Brands Inc. bankruptcy posed risk to other pensions
- Practices: Bankruptcy & Creditors' Rights, Corporate Transactions & Business
- Locations: Red Bank, NJ, New York City, Little Falls, NJ
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