NEW YORK (
The Deal) -- Electronics retailer
(RSH) has several options on the table it is considering, including a refinancing and a bankruptcy filing, said sources familiar with the matter.
The desired endgame is a refinancing, sources familiar with the situation said, even as bankruptcy is being weighed.
The Forth Worth, Texas-based company has struggled in recent years as it has attempted to make itself relevant in the age of Amazon.com'S (AMZN) e-commerce empire and Apple's (AAPL) sleek modernist stores.
New York hedge fund Standard General LP may be the one to ride to the rescue by helping to arrange that financing.
Yet, industry sources cautioned that while Standard General sees potential in RadioShack, it's also a minority shareholder with just under a 10% stake. So it may not be prepared to offer the same kind of help it extended to another retailer -- American Apparel (APP) -- for which it arranged $25 million in financing after the board ousted controversial founder and CEO Dov Charney.
While sources said that a quick decision on RadioShack's course may be forthcoming, one person cautioned that it was unlikely to be immediate.
David Glazek, a partner at Standard General, declined to comment, as did RadioShack and its financial adviser Peter J. Solomon Co.
Sources also said to be wary of attempting to predict an outcome at this point, because of the various options the company is currently weighing.
At issue is a $250 million second-lien term loan held by Salus Capital Partners LLC.
Sources have said Salus isn't supportive of the part of RadioShack's turnaround plans to close about 1,100 stores, as it would reduce the collateral that backs the second-lien loan, which would, in turn reduce a potential recovery in the event of a bankruptcy.
After lenders such as Salus objected to the store closure plan, RadioShack scaled it back to more than 200 store locations.
Salus declined to comment.
Lenders like Salus would prefer a bankruptcy filing sooner, rather than later, as that would increase the recovery rate. But a refinancing that would help it exit its loan would be preferable.
Salus has watched the financial situation at the retailer deteriorate faster than anticipated when it provided the loan last fall, sources previously said.
A new refinancing scenario where RadioShack is able to get incremental liquidity at the same time as it's allowed to close more stores, would buy the company some extra time, Manoj Chadha, an analyst with Moody's Investors Service Inc., previously told The Deal.
RadioShack has no debt due in the next year and total liquidity, as of May 13, stood at $424 million, primarily reflecting availability under its existing revolver.
But between seasonal inventory builds and money-losing operations, the retailer could burn through 95% of its liquidity by January, Fitch Ratings said recently.
In the recent quarter ended May 3, RadioShack posted a loss of $98.3 million, as year-over-year sales declined 13%, to $736.7 million. Analysts, on average, said they expect the company to lose $334 million for the fiscal year ending January 15, 2015.
Select the service that is right for you!COMPARE ALL SERVICES
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
- 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 + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV