Hedge fund BlueCrest Capital Management is coming to the defense of Fort Worth-based RadioShack, offering to help provide financing to repay lenders that have blocked the struggling retailer’s store-closing plans, according to a letter obtained by Bloomberg News.
BlueCrest, run by billionaire Michael Platt, said in the letter that the fund is a RadioShack shareholder and unsecured debtholder. The hedge fund supports the company’s attempt to shutter stores, which would help stem its cash burn, according to the letter.
The offer shows that some RadioShack creditors and shareholders are increasingly frustrated by other lenders that have blocked of Chief Executive Officer Joe Magnacca’s plan to close as many as 1,100 stores as a lifeline to the struggling electronics retailer. Lenders blocked the plan earlir this year, forcing RadioShack to limit closings to as many as 200 this year.
“The company’s deteriorating liquidity profile and dismal earnings give very little cushion” to “execute its turnaround strategy over the next several quarters,” Mickey Chadha, a senior analyst at Moody’s Investors Service, said in a report this week.
Without a capital infusion, RadioShack will probably face a cash crunch by the quarter ending Nov. 1, 2015, Moody’s said in the report. While the company has no debt coming due until 2018, operating losses will hurt liquidity and hobble its comeback, according to the credit-ratings company. The continued cash burn could also force suppliers to seek financial support, it said.
RadioShack shares (ticker: RSH) fell another 4.5 percent to 62 cents in mid-day trading today. BlueCrest’s letter was addressed to Magnacca, who joined the retailer in February 2013 to lead a comeback, and Chief Financial Officer John Feray. The copy of the letter obtained by Bloomberg News wasn’t dated.
BlueCrest is concerned that the interests of secured creditors aren’t aligned with the rest of the company’s stakeholders, according to the letter.
Ruth Pachman, a Kekst & Co. spokeswoman for RadioShack, declined to comment. Ed Orlebar, a spokesman at BlueCrest, didn’t immediately respond to e-mails seeking comment after hours.
Salus Capital Partners arranged a $250 million second-lien loan due in 2018 for RadioShack last year. GE Capital also arranged a $535 million asset-backed revolver maturing in 2018 last year, according to data compiled by Bloomberg. Both loans require lender approval to close more than 200 stores, according to credit agreements.
Brian Rudy, a spokesman for Salus Capital, didn’t immediately comment.
RadioShack has said it’s continuing conversations with lenders about store closings. The company’s loss widened in the first quarter to $98.3 million from $28 million a year earlier, and sales slid 13 percent to $736.7 million in the period, which ended May 3.
Last week, RadioShack received a delisting notice from the New York Stock Exchange after its stock price closed below $1 a share for 30 consecutive days.