This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

The Deal: RadioShack Struggles to Pay Down Debt as Losses Rise

Stocks in this article: RSH BBY T VZ

NEW YORK ( The Deal) -- While troubled electronics retailer RadioShack (RSH) just met a deadline to repay its notes, a ratings agency has warned that it could default on its debt in the next 12 months unless it makes a turnaround.

The Fort Worth, Texas-based company could be facing a liquidity crisis or financial restructuring in the next year, unless it makes significant progress, ratings agency Standard & Poor's warned in an Aug. 1 report.

In late July, RadioShack hired restructuring expert AlixPartners and investment bank Peter J. Solomon as financial advisers for a turnaround of the company.

One of the AlixPartners' managing directors, Holly Etlin, has also been named as RadioShack's new interim CFO, replacing Dorvin Lively, who left the company.

S&P downgraded the company's corporate credit rating and the rating on its $325 million in 6.75% senior unsecured notes due May 15, 2019 to CCC from CCC+, in the report.

"The company is dependent on progress with its strategic turnaround to reverse the substantial decline in profitability and ongoing cash use in order to avoid a financial restructuring," the S&P report said.

RadioShack has opened a new concept store, which is designed to offer a friendlier customer experience, while also giving customers a cleaner and more modern shop, but it remains to be seen if the strategic changes will be enough to alter its downward financial path. According to Moody's senior analyst Manoj Chadha, the company is revamping its stores and reducing the number of SKU's it carries in the stores in order to streamline its inventory and reduce its cash burn.

While it has also hired advisors, "it's still early in the process and hard to see any positive traction due to strategic initiatives at the moment," Chadha said, adding that "refinancing options seem quite limited given the company's operating performance."

The company paid down roughly $214 million of 2.5% convertible senior notes, which came due on Aug. 1 with cash, a RadioShack spokesman confirmed Friday, Aug. 2. RadioShack declined to comment further.

Since the debt pay-down, the company's liquidity is estimated at $215 million in cash and $385 million in revolver availability, which expires in January 2016, the S&P report said.

1 of 2

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!

Markets

DOW 17,778.15 +421.28 2.43%
S&P 500 2,061.23 +48.34 2.40%
NASDAQ 4,748.3960 +104.0840 2.24%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs