RadioShack Corp. (NYSE: RSH) shares are still soaring on Thursday after reports earlier in the week that shareholder Standard General could offer a financing package that might help the struggling retailer avoid bankruptcy for a while.
Source: Thinkstock
Hedge fund Standard General was the same outfit that offered a $25 million lifeline for American Apparel Inc. (NYSEMKT: APP) after the ouster of founder and chief executive officer Dov Charney. Standard General reportedly owned more than 7% of RadioShack as of June 30 and may have increased that stake to almost 10%. That is smaller than its stake in American Apparel, though. And at issue for RadioShack is a $250 million second-lien term loan held by Salus Capital Partners and others. So how much of a “rescue” can RadioShack expect?
Still, RadioShack CEO Joe Magnacca joined American Apparel’s board as part of that rescue deal, so it would seem that Standard General may have had the electronics purveyor in its plans back then.
Creditors such as Salus Capital Partners had blocked a plan to shut 1,100 underperforming RadioShack stores earlier this year, limiting the number of closings to only 200. Paying down debt may allow the retailer to return to its earlier plan and to stay afloat until some of its efforts at a turnaround have more time to pay off.
RadioShack faces stiff competition from the likes of Best Buy Co. Inc. (NYSE: BBY) and Amazon.com Inc. (NASDAQ: AMZN) and has struggled to revive itself. It is said to have burned through 40% or more of its cash on hand in its most recent quarter, leaving it with only $62 million. By some estimates, the retailer will run out of cash as soon as next year, without a rescue, necessitating a Chapter 11 filing.
Shares rose nearly 20% on Tuesday when reports first surfaced and continued to surge Wednesday. Shares were up another 30% in midday trading Thursday, at $1.42 in a 52-week range of $0.55 to $4.36. The mean price target of analysts is down at $1.13.
READ ALSO: 10 Brands That Will Disappear in 2015
Sponsored: Want to Retire Early? Here’s a Great First Step
Want retirement to come a few years earlier than you’d planned? Or are you ready to retire now, but want an extra set of eyes on your finances?
Now you can speak with up to 3 financial experts in your area for FREE. By simply clicking here you can begin to match with financial professionals who can help you build your plan to retire early. And the best part? The first conversation with them is free.
Click here to match with up to 3 financial pros who would be excited to help you make financial decisions.
Thank you for reading! Have some feedback for us?
Contact the 24/7 Wall St. editorial team.
Editors' Picks
