Salus Capital, the investment firm that made an ill-fated $250 million loan to RadioShack Corp., lost two top executives and may be sold by owner HRG Group Inc., according to four people familiar with the matter.
Andy Moser, Salus’s co-founder and chief executive officer, and Executive Vice President Marc Price left the firm following losses from the RadioShack loan, according to the people, who asked not to be identified because the moves hadn’t been announced. HRG, formerly known as Harbinger Group Inc., is reviewing options for the company that include a sale of the firm, the people said.
The 2013 loan to RadioShack was by far the largest by the Needham Heights, Massachusetts-based lender, which caters to distressed companies. It has lent to other retailers including American Apparel Inc., Frederick’s of Hollywood and Delia’s Inc., the teen-focused clothing chain that filed for bankruptcy in December. Until RadioShack, most of the firm’s loans were in increments of $30 million or less, according to its website.
The relationship between Salus and RadioShack, which needed funding to fortify its dissipating cash reserves, became strained from the start. Even before the loan was disbursed, RadioShack threatened to sue the firm for trying to back out of the deal, two people familiar with the transaction told Bloomberg News earlier this year.
It came to a head in 2014 when Salus blocked RadioShack’s efforts to close as many as 1,100 underperforming stores, a move that would have left fewer assets securing the loan, which paid an interest rate of 11.5 percent.
Salus was already facing increasing risk of losses as RadioShack’s cash drain accelerated. And the lender’s chance of avoiding a loss was complicated by a deal with investment firm Cerberus Capital Management LP, which bought $100 million of the loan, in return for the right to pick over the retailer’s assets before Salus in the event of a default.
RadioShack filed for bankruptcy protection on Feb. 5.
HRG is meeting with Salus’s employees Monday to review what happened and what to expect going forward without Moser and Price, two of the people familiar with the departures said.
Brian Ruby, a spokesman for Salus at Integrated Corporate Relations, didn’t immediately comment. James Hart, a spokesman for HRG, declined to comment.
HRG is also weighing a possible sale of some or all of its 81 percent in insurer Fidelity & Guaranty Life, which helped Salus finance RadioShack, the parent company said in a statement on April 6.
HRG has been shaking up management at the insurer, with Joseph Steinberg named last month to lead the board and Chris Littlefield appointed in January to replace CEO Lee Launer. The Des Moines, Iowa-based insurer had a $50 million investment in RadioShack, FGL said by e-mail in February.