RadioShack Corporation (NYSE:RSH) will continue its efforts towards restructuring and transforming its business, a company press release statement said. According to Joe Magnacca, Radioshack’s CEO, the company will keep its focus on operating its business and moving forward.
RadioShack Corporation (NYSE:RSH) released the statements in reaction to a breach notice it received from Salus Capital Partners, which allege that the ailing electronics retailer have violated covenants embodied under a $250 million credit facility provided by Salus and Cerberus Capital Management last year. Salus accuses Radioshack of defaulting on the loan on account of a new credit term it obtained in October 3 from Standard General LP in the amount of $120 million. Radioshack called Salus’ accusations as “wrong and self serving”.
Radioshack’s dispute with Salus emerged even as its lenders refused to approve the company’s plan of closing up to 1,100 stores as part of its cost cutting measures to beef up liquidity. Company estimates a figure of $83 million in additional earnings prior to amortization, depreciation, interest, and taxes if it could proceed with the planned store closures. Furthermore, the closures will give the company an estimated liquidity of $87 million. However, lenders are requiring the company to first settle a substantial amount of its debt before giving approval, on top of other terms that RadioShack Corporation (NYSE:RSH) considers as “unreasonable”.
A report by The Wall Street Journal cited unnamed “people familiar with the matter” that Salus, considering Radioshack’s current financial position, is trying to influence the company’s moves to minimize risks that Salus faces in an event of a bankruptcy. RadioShack Corporation (NYSE:RSH) warned in September that it might need to file for a chapter 11 bankruptcy protection.
In light of the coming holiday shopping season, RadioShack Corporation (NYSE:RSH) is calling on Salus to withdraw its breach notice and allow for the restructuring plan to go forward. RadioShack shares declined 20%, closing down 8% at 72 cents.
This article has been written by Nonito Guntan.