The Spokesman-Review Newspaper
The Spokesman-Review Newspaper The Spokesman-Review
Spokane, Washington  Est. May 19, 1883
Current Temperature
58°F
Current Conditions
Clear sky
View complete weather report
Subscribe now

Radio Shack says it’s on the brink

Associated Press

NEW YORK – RadioShack warned Thursday that it may need to file for Chapter 11 bankruptcy reorganization if it can’t rework its debt or find another way to ease a cash crunch.

The struggling retailer said in a regulatory filing that it is in talks with its lenders, bondholders, shareholders and landlords to fix its balance sheet, but if it can’t, it will try to file a prepackaged bankruptcy.

RadioShack, based in Fort Worth, Texas, has been working on turning around its business for the past 18 months. The company’s efforts have included cutting costs, renovating and closing stores, and shuffling management. It reported another quarterly loss on Thursday on lower revenue.

CEO Joseph Magnacca said efforts to fix the company’s problems could include debt restructuring, closing more stores and other cost-cutting measures. He said the company is reviewing several alternatives, some that would need consent from its lenders.

RadioShack is quickly running out of cash and warned Thursday that it doesn’t have enough left to fund its operations beyond the “very near term.” The company reported $30.5 million in cash and cash equivalents on hand as of Aug. 2. That’s down from $179.8 million at the end of last year.

The company has struggled to find its place in the evolving retail and technology landscape. It’s sought to remake itself, focusing on wireless devices and accessories, but growth in that business is slowing as more people have smartphones and see fewer reasons to upgrade. The company says it is working on becoming less dependent on that business.

It is trying to update its image and remain competitive against online and discount retailers. It also is working to add new products, including private-brand and exclusive items.

Noting the company’s dwindling cash, Standard & Poor’s Ratings Services downgraded its corporate credit rating on RadioShack further into noninvestment grade, or “junk,” territory Thursday.

“We believe the company will default or restructure in some form that is tantamount to a default within the next six months,” S&P said in cutting its RadioShack rating to “CCC-” from “CCC.”