WSJ: RadioShack Priming To File For Bankruptcy

(RTTNews) - Shares of RadioShack Corp. (RSH) plummeted nearly 32 percent in extended trading on Wednesday after a Wall Street Journal report revealed that the beleaguered consumer electronics retailer is priming to file for bankruptcy protection as early as the beginning of February after its efforts to improve cash position failed.

RadioShack has already begun talks with a private-equity firm that could buy its assets out of bankruptcy. It may also try to stitch a deal whereby the company could reduce debt and restructure its operation in the bankruptcy court.

The Fort Worth, Texas-based 94-year old retail chain has been trying hard to avoid a bankruptcy filing after running out of cash supply. The company has been striving to strengthen its balance sheet, cash supply and re-invent itself to avoid filing for bankruptcy.

RadioShack has also posted eleven successive quarterly losses, and has made it clear that it is running dangerously low on cash.

In a December filing, Radioshack said it may have to file for bankruptcy unless it was sold, restructured, or received a major cash infusion. The company's total debt was $841.5 million at November 1.

Earlier in the year, RadioShack's creditors had blocked its plan to close 1,100 stores, forcing it to limit the closings to about 200 stores instead. The closure of more underperforming stores would have enabled the company to reduce costs to stay in business.

RadioShack received a $250 million cash infusion in 2013 from Salus Capital Partners and Cerberus Capital Management. Salus Capital has Tuesday reportedly offered RadioShack $500 million in bankruptcy financing. The offer is for what is known as a debtor-in-possession loan, which companies use to fund their operations in bankruptcy.

Salus claimed RadioShack violated terms of the loan in accepting a lifeline from shareholders New York-based hedge fund Standard General LP and Litespeed Management LLC.

RadioShack had reportedly entered into an agreement with a consortium led by Standard General LP in October to refinance about $590 million of loans to re-stock ahead of the holidays. Standard General had revealed in a filing in September that it's working to improve RadioShack's liquidity ahead of the holiday season.

Standard General, RadioShack's largest investor, also reached an agreement lasting until June 2015 that prevents it from taking over the board or proposing an acquisition or restructuring without RadioShack's consent.

RSH closed Wednesday's regular trading session at $0.41, down $0.06 or 12.56% on a volume of 2.60 million shares. The stock plunged a further $0.13 or 31.72% in after-hours trading.