FORT WORTH—RadioShack Corp. late Fridayannounced a deal to restructure a portion of its existing debt andhelp it get through the holiday selling season. However, theagreement with a group led by Standard General LPmay see control of the struggling electronics retailer's stock passto the lenders.


Under terms of the agreement announced Friday afternoon,Standard General and other investors have acquired RadioShack'ssenior secured asset based credit facility, replacing GECapital as lead lender. In the process, the group has alsoeased credit availability, providing RadioShack with $120 millionto collateralize letters of credit.


Assuming that holiday sales are strong and the company—whichrecently cited bankruptcy as an option—is in relatively goodshape, the lenders will convert that $120 million into between 50%and 80% of RadioShack stock. Although existing shareholders will beable to acquire more stock in a rights offering planned for earlynext year, they will not own a majority.


Completion of that conversion into equity would not occur untilother conditions are met, RadioShack said Friday. Among them arethe modification of a supplier contract; at least $100 million ofavailable cash and borrowing capacity at Jan. 15, 2015; developmentof a fiscal 2016 plan satisfying certain requirements; and thecompletion of a rights offering to existing shareholders at 40cents per common share equivalent.


“We recognize that we will need to address constraints under ourexisting term loan in order to undertake a store base consolidationprogram and pursue other measures to reduce our cost structure,”says RadioShack CEO Joe Magnacca. He notesthat the deal with Standard General “provides time to pursuea longer-term restructuring. To that end, we are inconstructive discussions with our term lenders, led bySalus Capital, toward additional steps torecapitalize RadioShack.”

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Paul Bubny

Paul Bubny is managing editor of Real Estate Forum and He has been reporting on business since 1988 and on commercial real estate since 2007. He is based at ALM Real Estate Media Group's offices in New York City.