Hedge Fund Monarch Said to End Talks on RadioShack LoanJodi Xu Klein and Jeffrey McCracken
Monarch Alternative Capital LP abandoned negotiations to take over a $140 million loan to RadioShack Corp. as the electronics retailer struggled to reach a deal with lenders on a turnaround plan, according to two people with knowledge of the matter.
Monarch, run by Michael Weinstock, backed out talks it was leading with two other hedge funds to acquire the asset-backed senior loan and renegotiate the terms, said the people, who asked not to be named because the discussions were private. The company continues to talk with the other funds and with other potential lenders, one of the people said.
RadioShack is seeking to refinance the debt to loosen terms that may restrict the amount it can borrow under the loan in March, the people said. That would give the company time to implement a turnaround plan and avoid a cash crunch that management said in a Sept. 11 regulatory filing may lead to bankruptcy.
The loan is part of a $585 million funding package arranged last month by RadioShack’s largest shareholder, Standard General LP, that gave the retailer enough cash to operate through the holiday season. Any deal to refinance the debt will be contingent on whether a key RadioShack lender, Salus Capital LLC, agrees to a company plan to close underperforming stores, one of the people said. Salus owns part of a $250 million, second-lien loan.
Its initial plans to close as many as 1,100 stores were blocked by lenders including Salus earlier in the year, limiting to less than 200 of the sites that could be shuttered. Salus is affiliated with Philip Falcone’s Harbinger Group Inc. Closing unprofitable sites would help the chain preserve cash.
RadioShack had 5,387 outlets on Aug. 2, according to data compiled by Bloomberg.
Merianne Roth, a spokeswoman at RadioShack, David Glazek, a spokesman for Standard General, and Stacey Maman, a spokeswoman at New York-based Monarch, declined to comment.
Salus attempted to buy as much as $465 million of RadioShack’s senior loans last month, two people with knowledge of the discussions told Bloomberg at the time.
Distressed hedge fund investors are interested in buying the struggling retailer’s senior debt to position themselves in restructuring negotiations in case the company files for bankruptcy.
Standard General’s October financing that retired the senior debt held by GE Capital, General Electric’s finance arm, altered the loan terms and provided the company with additional capital.
RadioShack has about $1.06 billion of debt, comprising $325 million of senior unsecured notes due in May 2019 and loans maturing December 2018.