RadioShack Corporation (RSH) Plunge in Deeper Financial Woes Pending Lenders’ Approval of Restructuring Plan

RadioShack Corporation (NYSE:RSH) is finding itself deeper in trouble as it has yet to gain the approval of its lenders on the planned closures of 1,100 stores in an effort to cut costs and possibly beef-up liquidity. The ailing electronics retailer has abandoned the original number of stores it has set its sight to close on account of opposition from its creditors, and has reduced the number to 600 over three years. It also announced earlier in September that it may file for a chapter 11 bankruptcy protection.

RadioShack Corporation (NYSE:RSH)’s credit default swaps have reached a high of 93 percent since December, according to CNBC, citing Fitch solutions. The record rate was reached even as a possible breach of covenant with Salus Capital, one of its major lenders, is being determined. Salus Capital argues that the refinancing agreement that Radioshack has entered into with Standard Capital in October this year, in the amount of $120 million, violated the terms of the previous year’s $250 million credit facility between Salus and Radioshack.

RadioShack Corporation (RSH)RadioShack Corporation (NYSE:RSH) is currently bracing with a quarterly loss of 18.5 percent amounting to $161.1 million, or $1.58 per share, up from $135.9 million the previous year. Continuing operations nets to a loss of $1.23 per share, as against analysts estimates of $1.04 per share. Net sales dropped 16 percent to $650.2 million, as against analysts expectations of $717 million. RadioShack has a liability in the amount of $1.39 billion, overwhelming its asset of $1.2 billion as of February this year. CEO Joseph Magnacca is aiming a target of $400 million in annual earnings by way of cutting expenses and store closures, but according to Fortune,  Radioshack is also suffering from a $400 million loss for the first nine months of the current fiscal year, with Wall Street analyst expecting another $100 million loss for the latest quarter.

Meanwhile, Standard & Poor’s expects RadioShack Corporation (NYSE:RSH)’s liquidity to remain weak and the company will continue to endure cash burn, noting that approval from lenders regarding store closures would be difficult to obtain.

This article has been written by Nonito Guntan.

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