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RadioShack weighs $585M financing offer amid cash woes

According to the Wall Street Journal, electronic and mobile products retailer RadioShack Corp. (RSH) is assessing a $585 million financing package in order to save itself from bankruptcy. The financing package is headed by UBS AG (UBS) and hedge fund Standard General LP.

UBS will organize $325 million, whereas Standard General will give $260 million, which will substitute a $585 million loan and credit facility from GE Capital, a part of General Electric Company (GE).  Standard General and UBS do not plan to shut down stores. Rather, they will reportedly bolster the pace of renovations sought by the beleaguered company.

Last Thursday, RadioShack had revealed its dwindling cash position and the possibility of filing for Chapter 11 bankruptcy, going ahead, if it fails to improve its cash balance.

Despite attempts to turn around its business over the last 18 months, the company has continued to struggle. RadioShack’s core consumer electronics (including digital TVs, digital music players and digital cameras) retail business has been on a secular downtrend and is unlikely to recover in the near future. Moreover, loss of foot traffic is taking a toll on RadioShack’s mobility business – a platform which the company had been banking on for future growth.

Investors’ apprehension about RadioShack’s future increased further following dismal financial numbers reported for the second quarter of fiscal 2015, on Sep 11. The company’s adjusted loss per share of $1.00 was much wider than the Zacks Consensus Estimate of a loss of 59 cents. Meanwhile, total revenue came in at $673.8 million, down 21.8% year over year and below the Zacks Consensus Estimate of $742 million. At the end of the quarter, RadioShack had only $30.5 million in cash & cash equivalent compared with $109.6 million at the end of Feb 1, 2014.

Notably, comparable-store sales for company-operated stores and kiosks (stores and kiosks that have been operational for at least a year) were down 16.9% in the reported quarter, mainly affected by traffic declines and a slowdown in the mobility business.

RadioShack currently has a Zacks Rank #3 (Hold).
 
RADIOSHACK CORP (RSH): Free Stock Analysis Report
UBS AG (UBS): Free Stock Analysis Report
GENL ELECTRIC (GE): Free Stock Analysis Report
 
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Zacks Investment Research is characterized by a team of experts who are passionate about your investing success and is focused on sharing the same reliable investment research they would want for themselves.