Radio Shack Files For Bankruptcy

February 5, 2015 0 Comments

I called it…

Then again, I wasn’t the only one. The credit markets have been assuming this one for at least a year. Not that I ever purchased or bought anything from RadioShack frequently, but others have some found memories of the retailer. Whenever you needed a cable (or several), it was there. Whenever you needed batteries that your local convenient store didn’t carry, it was there. Whenever you wanted to get a soldering iron or components for your washing machine, it was there. Now, the 94-year-old electronics store has finally pulled the plug.

So what exactly is going to happen with Radio Shack? Well, first things’ first, it’s going to be delisted from the New York Stock Exchange. This is standard, considering the company is failing to meet the exchange minimum average market value requirement of at least $50 million, but it has also failed to outline steps to the SEC of how it would meet this requirement in the future. Just in case they make it out of the bankruptcy process (which might not be likely).

However, ever since the company has delisted, its been trading as an OTC under the ticker symbol OTCPK:RSHC.

Unfortunately, Radio Shack was unable to reverse sales trends and revitalize any shareholder support (I knew I should have shopped inside more…). Profits have been deteriorating for three straight years, cash flow completely dried up, and virtually no remaining support from their existing creditors. The company ultimately had no choice but to file for Chapter 11 Bankruptcy.

Who comes out on top of this? Secured creditors, naturally. Radio Shack already reached an Asset Purchase Agreement with an affiliate of Standard General to acquire up to 2,400 stores. Radio Shack is also working with Sprint on a retail model known as “store within a store” to acquire up to 1,750 additional shops. Also, while they are planning on closing the remaining underperforming locations, the company also secured a commitment for $285 million debtor-in-possession financing (DIP) from their current lenders.

So, for the most part, Radio Shack’s lenders will be made whole. The ones who will most likely suffer through all of this are the shareholders, which it seems they will be left penniless as the stock eventually moves closer to zero.

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