RadioShack reportedly seeking new financing to win over vendors

Posted Thursday, Oct. 03, 2013  comments  Print Reprints
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Fort Worth-based RadioShack plans to raise money by the end of 2013 to persuade suppliers to support its turnaround effort, people familiar with the matter said.

The consumer electronics retailer has enough liquidity to last through 2014 and is arranging new financing to show suppliers that it has all the capital needed for its turnaround, said the sources, who asked not to be identified because the financing negotiations are private.

The retailer would seek to raise the cash through debt financing, one source said.

Joe Magnacca, who took over as chief executive officer in February, is counting on vendors to supply exclusive products to help RadioShack distinguish its offerings from rivals. RadioShack has posted six straight quarters of net losses and declining sales as customers defect to big-box retailers such as Best Buy and online competitors including Amazon.com.

“It probably has capacity for more debt,” said Joscelyn MacKay, a credit analyst at Morningstar in Chicago. She estimates that the retailer could borrow $100 million without leading her to reduce her credit rating of CCC. It has the option of borrowing under a new loan or under two existing loans due in 2016 and 2017, she said.

Maggie Thill, a RadioShack spokeswoman who works for Weber Shandwick, declined to comment on financing plans.

Magnacca, RadioShack’s fourth CEO in three years, said in July that he had hired turnaround adviser AlixPartners and investment bank Peter J. Solomon to explore refinancing debt. At the same time, he named Holly F. Etlin, one of AlixPartners’ managing directors, the retailer’s interim chief financial officer.

In stores, Magnacca is reducing the number of slow-selling items to cut clutter while improving displays to boost sales of major brands, including Apple. He told analysts in July that he met with vendors to explain his plans for revamping stores so “they can place their bets on us, which I believe they are.”

The company lost $53.1 million in the second quarter, more than doubling its year-earlier loss of $21 million, as sales slid 0.5 percent to $844.5 million.

In August, Standard & Poor’s downgraded RadioShack’s debt to CCC, saying a default was possible within 12 months “absent a major business turnaround or increased liquidity.”

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