Is RadioShack a bankrupt dinosaur?

By Mitchell Schnurman

mschnurman@star-telegram.com

RadioShack is in a slump of historic proportions, with its stock price falling to an all-time low recently. Now Bloomberg News has put the spotlight on RadioShack’s performance in the bond markets, and it’s just as ugly.

In addition to debt-rating agencies downgrading its notes, the price of credit default swaps is soaring; the instruments are used as insurance in case the company reneges on interest and principal payments.

A swap to protect $10 million in RadioShack notes sells for $3.8 million up front, Bloomberg reported. The same swap cost $966,000 in January.

The prices of the derivatives imply an 84 percent chance of default within five years, wrote reporter Mary Childs. Kodak hit that level six months before filing for bankruptcy, and American Airlines’ parent reached it two months before filing.

RadioShack notes due in 2019 are selling for 65 cents on the dollar, down from 90 cents in January.

Melissa Weiler, a money manager, said the market appears surprised that the company has survived. Other analysts cited the tired business model, the cash-burn rate and the lack of a catalyst for improvement.

“RadioShack seems to be one of a few dinosaurs remaining out there,” Weiler told Bloomberg.

The company’s directors haven’t given up, and on Friday, they bought some beaten-down shares to prove it. But as in its retail business, RadioShack is losing the confidence game.

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