Following RadioShack’s surprise announcement Thursday that it could not come to an agreement with its lenders that would not allow it to close 1,100 stores, it can't sell more than 200 per year. The company had retained Melville, N.Y.-based A&G Realty Partners to manage the disposition of RadioShack closing 1,100 stores back in March and still plans to sell a number of outlets in an attempt to staunch the flow of red ink.
The company’s credit agreement allows it to close only 200 stores a year and up to 600 over the life of the agreement. RadioShack had been negotiating with its lenders for approval to close nearly twice that total number.
In a document filed with the Securities and Exchange Commission on Thursday, the company said that its lenders were demanding terms that it could not accept, and that was why it would scale back the reorganization.
RadioShack’s strategy had been to proliferate, and therefore to be convenient for consumers.
But that strategy is no longer viable given the growing convenience of online shopping and heavily discounted items at big-box and other retail stores. In its last fiscal year, RadioShack reported a loss of $400 million, a substantial slide from its loss of $139 million the year before.
Joseph C. Magnacca, the company’s chief executive, was hired last year to revitalize the faded brand, which has a total of 4,300 stores in the United States.
“Not being able to get the necessary waivers from their banks effectively sends RadioShack management back to the drawing board on formulating a turnaround plan — and time is increasingly not on their side,” Anthony Chukumba, an analyst at BB&T Capital Markets, said in an email. “That said, this is also a bit of a game of chicken — if the banks play hardball too much. RadioShack may end up being forced to file for Chapter 11 bankruptcy, which will leave the banks fighting over the scraps.”
The company’s stock, which has plummeted over the last several years, rose slightly on the news in after-hours trading, to $1.50.