RadioShack may be close to filing for bankruptcy protection, a move Wall Street has been expecting for months as the embattled electronics retailer continues to bleed cash.
The Wall Street Journal, citing people familiar with the matter, reported that a filing could come in the first week of February and that RadioShack is in talks with a private-equity firm that could buy its assets out of bankruptcy.
The company warned in December that it could be forced into bankruptcy if it couldn’t raise new funds or get relief from lenders who have blocked its efforts to close up to 1,100 stores. As of Nov. 1, it had only $62.6 million on hand — $43.3 million in cash and $19.3 million in borrowing availability — according to a regulatory filing.
“What looked to be a tough holiday season — visits to stores revealed little traffic on key shopping days — may have been the last straw,” the WSJ suggested.
RadioShack hired former Walgreens executive Joe Magnacca two years ago to lead a turnaround strategy that included revamping the company’s store fleet and repositioning it in part as a smart-phone repair shop. But the WSJ noted that objections from lenders have “prevented the company from closing hundreds of stores it felt it needed to shut down to stay afloat.”
In a research bulletin in September, Wedbush Securities predicted RadioShack would be forced into bankruptcy, saying creditors were in control of the company and would force a reorganization. The terms of its loan agreement barred the retailer from closing more than 200 stores per year or 600 over the life of the agreement.
RadioShack shares were down another 10 cents at $0.30 in trading Thursday. Investors “are about to watch those shares go to zero,” the website 247wallst.com predicted.
The WSJ’s sources cautioned that RadioShack’s talks with the private-equity firm may not produce a deal and that the company may try instead for a more typical reduction of debt and restructuring of its operations in bankruptcy court.
Photo: Eduardo P, CC BY-SA 3.0