RadioShack Fighting With Its Lenders

As the struggling RadioShack chain is trying to restructure and survive, the last thing it needs is a public battle with its lenders. And yet, the last thing one needs is sometimes exactly what happens—and such is the plight of RadioShack.

“The standoff marks the second time this year that RadioShack’s cost-cutting efforts have run into public opposition from lenders who just a year ago provided a $250 million lifeline that helped keep the electronics chain in business this year,” reported The Wall Street Journal. “Now those lenders—Salus Capital Partners and Cerberus Capital Management—are blocking RadioShack’s plans to close around a quarter of its 4,300 U.S. outlets, a move aimed at freeing up $200 million in costs.”

RadioShack issued a statement defending itself.

“Despite their intimate knowledge of the challenges that RadioShack faced when they extended credit to us late last year, our current term lenders have repeatedly blocked our efforts to accelerate and intensify our turnaround and make smart decisions for our business. Now, prompted by their narrow self-interest, they appear to be trying to manufacture a problem during the critical Holiday shopping season in an effort to get out of a loan on which they have already reaped more than $35 million in fees and interest payments,” said RadioShack CEO Joe Magnacca. “We intend to do everything in our power to prevent them from using what we see as unfounded technical arguments to benefit unjustly at the expense of other creditors, the hundreds of communities we serve, the many other businesses we support and the jobs of more than 25,000 hard-working people. This is particularly disturbing in light of meaningful steps we have taken in our turnaround plan, as well as the recapitalization steps announced in October which, if conditions are satisfied, would result in the conversion of at least $120 million of debt into equity.”