RadioShack Corporation (NYSE:RSH) has had huge financial troubles this year, losing up to 60% of its value in the market. The company at some point this even went as far as reporting that if it didn’t find alternative sources of funds to boost its activities, it would have not otherwise but to resort to bankruptcy.
That’s now unlikely in the short term as the company has come to an agreement with Standard General LP to refinance a $535 million credit facility in a bid to help the company restructure its loans and prepare for the holiday season. The deal now makes it possible for RadioShack Corporation (NYSE:RSH) to restock ahead of the holiday, which is a known period for retailers to score big in sales.
The company reported today that Standard General LP rallied a group of lenders to acquire the funds and loosen loan terms to enable the company continue in its business. The loan is said to have been secured from the lending arm of General Electric Co. (GE). Standard General LP and Litespeed Management LLC are also to immediately avail a total of $120 million to the company in cash. The Fort Worth, Texas-based company said that it expects the funds to be converted into equity at some later date.
Standard General LP own up to 10% of RadioShack Corporation (NYSE:RSH), making it the single biggest shareholder. Many market observers contend that the gesture by the company is due to the little hope it still has on the stock.
The management of RadioShack Corporation (NYSE:RSH) have been holding talks with investors and creditors in an effort to keep them around as the company pursues a turnaround in its fortunes. Things have however not been cozy as the company stock has been trading as low as under $1.
The biggest challenge that the company has faced is poor performance in product sales, something that has seen the stock contemplate going out of business.
Some critics have asserted that in as much as the company receives a lifeline, it may not be able to sustain the momentum as sales cannot be guaranteed. The company’s performance during the holiday season will go a long way in determining whether it will successfully survive the market pressure to trade strongly and steadily.
The stock sprung a surprise on Friday, jumping as high as 35% after the news came out that the company had secured the said refinancing.
This article has been written by Victor Ochieng.