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RadioShack Vendor Nixes New Terms

Fort Worth, Texas — RadioShack said it tried and failed to convince a “major vendor” to modify the terms of their partnership to help ease the chain’s financial strain.

RadioShack didn’t identify the supplier, but said the talks also included some of its largest creditors and are ongoing.

 In a federal filing, the retailer said it is seeking “potential modifications to the commercial relationship that could be beneficial to a financial restructuring” as it scrambles to avert insolvency.

Indeed, 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 $424 million in May to $183 million last month, while second-quarter losses ballooned to $137.4 million.

Earlier this month, Fitch Ratings downgraded the company’s default rating, citing a potential funding shortfall as it begins to stock up for the holiday season, and RadioShack itself conceded that it may not have sufficient cash and working capital to fund operations “beyond the very near term.”

The retailer said it is continuing to look for ways to leverage its “various commercial relationships in light of alternative restructuring scenarios,” which could involve lenders, bondholders, shareholders, lease counterparties and other stakeholders.

The company had earlier said it is in “advanced discussions” with potential white knights, which reports identified as investment bank UBS and hedge fund Standard General. The investors supposedly crafted a $585 million financing package, but no mention of the deal was made in today’s 8-K filing.

RadioShack said other options include forming a partnership or seeking an out-of-court restructuring, either of which would likely include store closings and debt restructuring.

Short of those, a voluntary Chapter 11 filing or, worst-case scenario, Chapter 7 liquidation could follow, the company warned.