RadioShack Corp. (NYSE: RSH) is at odds with its lenders again. The battle is over whether the retailer can close 1,100 locations, among other things. The loans involved are the only life preserver RadioShack has. If they are withdrawn, the value of stock owned by common shareholders could quickly race to $0. The company’s market cap is already down to $74 million.

RadioShack management’s argument against the actions of lenders is that “it believes these claims are wrong and self-serving.” That alone is not argument against the actions of the lenders; it is a statement based on management’s admission that it has almost no leverage, at least in the short term.

Even if the RadioShack position has some merit, by the time management can conclude a compromise with lenders, the critical holiday season will have ended. RadioShack’s opportunity at a turnaround will have ended as well.

To make his case, CEO Joe Magnacca said:

Despite their intimate knowledge of the challenges that RadioShack faced when they extended credit to us late last year, our current term lenders have repeatedly blocked our efforts to accelerate and intensify our turnaround and make smart decisions for our business. Now, prompted by their narrow self-interest, they appear to be trying to manufacture a problem during the critical Holiday shopping season in an effort to get out of a loan on which they have already reaped more than $35 million in fees and interest payments.

The “they” is Salus Capital Partners, a unit of Harbinger Group, and “they” hold a $250 million term loan facility without which RadioShack cannot operate.

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Unfortunately, Magnacca’s claim may not have any merit. More unfortunately, the position that the lenders have taken, perhaps to increase their financial yield, may be the one thing that stands between RadioShack’s continuing as public company and having to go into bankruptcy. The lenders hold all the cards, at least for the time it would take to get the dispute resolved in court, which could be several months.

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