RadioShack Debt Gets Even Junkier
ThinkstockAfter markets closed last night, Standard & Poor’s downgraded the already junk-rated debt of RadioShack Corp. (NYSE: RSH) from ‘CCC+’ to ‘CCC’. That’s eight notches below investment grade. S&P’s outlook on the company remains negative. S&P said that the downgrade…
After markets closed last night, Standard & Poor’s downgraded the already junk-rated debt of RadioShack Corp. (NYSE: RSH) from ‘CCC+’ to ‘CCC’. That’s eight notches below investment grade. S&P’s outlook on the company remains negative.
S&P said that the downgrade reflects the agency’s view that RadioShack could default within 12 months without a major turnaround or increased liquidity. We should probably count out more liquidity because lenders willing to front some cash to RadioShack are likely to be pretty scarce. And those that are willing will want a pretty steep premium, which will not help the company in the short term.
Earlier this year we closed our eyes and held our noses and put RadioShack on our list of the nine most promising turnarounds of the year. But we added as many caveats as we could stack up:
We would simply point out here that this is a situation where investors are betting with enough dollars that whatever turnaround plan that will be formalized actually works, or at least stops the bleeding. With a new solid CEO, our key-man concern is that RadioShack hired a guy with a drugstore background. Maybe it is that no one else was willing to gamble on a career here. We remain doubtful, unless RadioShack will open a prescription drug delivery service as well.
Shares are down about 10.4% in the early afternoon today, at $2.59, in a 52-week range of $1.90 to $4.28. That’s still a gain of about 36% from the low. It’s also about 40% below the high.
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Paul Ausick has been writing for 247Wallst.com for more than a decade. He has written extensively on investing in the energy, defense, and technology sectors. In a previous life, he wrote technical documentation and managed a marketing communications group in Silicon Valley.
He has a bachelor's degree in English from the University of Chicago and now lives in Montana, where he fishes for trout in the summer and stays inside during the winter.