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

However, RadioShack's cash and credit availability is expected to diminish as the holiday season approaches. S&P doesn't expect the company to generate any free operating cash flow in 2013 due to its poor profitability, and believes its access to the capital markets is limited.

But, Chadha said the company has an ample liquidity runway and isn't expected to have any major capital expenditures this year.

"The company's operating performance has experienced steady deterioration over several quarters and we now view liquidity as weak under our criteria," said S&P credit analyst Nalini Saxena, in the report. "Our view incorporates an assumption of ongoing tightening of vendor terms and outlays required to pursue the product mix shift and store refresh initiatives designed to kick start a revival of the business."

RadioShack announced its second quarter earnings on July 23, reporting a net loss of $53 million for the quarter ended June 30, up 152% from a loss of $21 million for the same period a year ago as its revenue decreased to $845 million in the second quarter of 2013 from $849 million year-over-year. The company did have a 1.3% increase in comparable store sales. The company had $713 million in debt maturing between 2016 and 2019, as of June 30, before its recent debt pay-down.

RadioShack's stock, which trades on the New York Stock Exchange under the symbol RSH, closed at $2.57 on Friday, down from Thursday's closing price of $2.89.

According to Howard Davidowitz, chairman of Davidowitz & Associates Inc., a national retail consulting and investment banking firm, RadioShack is in tremendous trouble. "The segment they are in has been decimated," Davidowitz said, adding that consumer electronics retailers CompUSA and Circuit City Stores both went out of business and Best Buy (BBY - Get Report), which is the best in the class, is struggling.

The company is being pressured by online competitors, as well as AT&T (T - Get Report) and Verizon Communications (VZ - Get Report), which are growing like crazy and building stores everywhere, including in locations that RadioShack has its stores, Davidowitz said.

"They are a shrinking, deteriorating asset," Davidowitz said, adding that it's a toxic combination that RadioShack also has a lot of debt.

Written by Jamie Mason

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