NEW YORK (The Deal) -- RadioShack (RSH) is making a strong bid to become the U.S.'s most troubled retailer, replacing the likes of J.C. Penney Co. (JCP - Get Report) and Sears Holdings (SHLD - Get Report), as it reported dismal fourth quarter results Tuesday.
The company has become so troubled that private equity firms that specialize in distressed retailers had looked at investing and passed, sources said.
The electronics retailer saw its stock and bonds pummeled on Tuesday after revealing a comparable store sales decline of 19% year-over-year and a wider than expected operating loss of about $166 million.
The Fort Worth, Texas-based company also announced that it would close up to 1,100 stores, or about a fifth of its total locations, subject to the consent of its lenders under a 2018 credit agreement.
Must Read: Moelis & Co. Seeks to Avoid Activists in IPO
RadioShack notes dipped by 10 points to all-time lows, trading yesterday in the mid-sixties, but dropping today to the mid-fifties, according to data provided by Bloomberg.
Meanwhile, RadioShack's stock closed down Tuesday more than 17% at $2.25 per share.
The company's total liquidity at the end of the fourth quarter was about $554 million including nearly $180 million in cash and cash equivalents and nearly $375 million under its credit agreement maturing in 2018. That was down from a total of about $612 million at the end of the third quarter, including cash and cash equivalents of approximately $316 million and about $296 million available under a revolver that was to expire at the beginning of 2016.
That means the retailer went through roughly $136 million in cash in the fourth quarter, the crucial holiday season when retailers are expected to add cash to the balance sheet, while increasing the availability under its revolver by about $80 million from the new credit agreement.
Still, the company expects that liquidity will help the business survive through this year. CFO John Feray said on RadioShack's earnings call, in response to an analyst's question, that the company has no plans for a prepackaged bankruptcy as a way to get out of leases.
RadioShack's total debt as of Dec. 31, which matures between 2018 and 2019, was $614 million. The increase in its revolver and the debt are the result of a debt financing of $835 million provided in November by a consortium of lenders, including General Electric Co.'s GE Capital, CIT Corporate Finance, RBS Citizens NA and Salus Capital Partners LLC.
The financing included a $535 million senior secured asset-based revolving credit facility and a $250 million term loan, as well as a $50 million five-year FIFO. Collateral for the debt stretches across all the company's assets, a source said.
The November financing became necessary after private equity firms took a look at RadioShack last year, but decided against investing, two sources familiar with the situation said. In a situation similar to other retailers these firms had eyed ranging from now defunct Circuit City Stores Inc. to Best Buy Co., the potential private equity investors believed the retailer's business model had no long-term viability, the sources added.
The company did not immediately respond to requests for further comment.
Magnacca said in a statement, "Our fourth quarter financial results were driven by a holiday season characterized by lower store traffic, intense promotional activity particularly in consumer electronics, a very soft mobility marketplace and a few operational issues."