Fort Worth, Texas — RadioShack is in advanced talks with potential white knights that may provide a fresh capital infusion and avert a possible bankruptcy.
In a statement, CEO Joe Magnacca said discussions are well along with the unidentified backers — reported to be RadioShack shareholder Standard General LP, a hedge fund, and investment bank UBS — although the mechanics of the supposed $585 million recapitalization are still being finalized.
Confirmation of the talks comes as the troubled CE chain reported dwindling liquidity and a $137.4 million net loss for its second fiscal quarter, ended Aug. 2, compared to a year-ago net loss of $52.2 million.
Net sales sank 22 percent during the period, to $673.8 million, and comps declined 20 percent due to reduced store traffic and softness in its postpaid mobile business.
“We have been challenged by the persistent industrywide decline in consumer electronics and soft mobility market,” Magnacca said. “The postpaid mobility business drove the majority of the weak performance this quarter due to lackluster consumer interest in the current handset assortment, consumers waiting for an iconic handset launch this fall, and intense promotional activities by the wireless carriers.”
The company is addressing the issue by improving its activation process and adding new wireless offerings, the CEO said, while lessening its dependence on mobile by revamping its product assortment, remodeling its stores and providing new services like its Fix It Here in-store mobile repair program.
Magnacca noted that a potential recapitalization could require the consent of RadioShack’s lenders, who previously scuttled a plan to close some 1,100 stores. The consolidation, which would have affected a quarter of the store base, is needed to slash the chain’s cost structure and staunch its losses, the company contends.
Magnacca said he is working with current lenders, bondholders, shareholders and landlords to overhaul the balance sheet and create a long-term solution that may include store closings and a debt restructuring. But the clock is ticking for the iconic CE chain, which continues to burn through cash. Total liquidity, including cash, cash equivalents, and available credit, fell from $423.7 million in May to $182.5 million last month, while total debt, due between 2018 and 2019, rose to $658 million last quarter.