BTIG Comments on Situation at RadioShack Corp. (RSH)

Rumors earlier this week said Standard General LP is exploring potential rescue funding for RadioShack Corp. (NYSE: RSH) that may include issuance of equity, debt, or a combination of both. Analyst William Frohnhoefer of BTIG said he "struggles to see any fundamental reason for the stock move absent a palpable term sheet."

"Our reading of the term loan indicates that there would be no onerous makewhole payment – the only significant penalty we can see is a fee of as high as 4% in the event of a bankruptcy. The term loan is, in theory, replaceable," said Frohnhoefer. "In practice, we think that it would take multiple willing new creditors to put in for the new financing, and we haven’t spoken to anyone who has seen as much as a preliminary term sheet. So the refinancing has to remain in the realm of theory for now."

"The unsecured bondholders would definitely not want to see more debt layered on top of them by a new financing, and all things being equal, might prefer a filing sooner rather than later to preserve as much of their recovery as is left. They are in an equivocal position: there will most likely be more debt layered on them outside of reorganization (if the reported refinancing ever takes shape), and also inside of it, since we think the firm would need an expanded debtor-in-possession facility of some kind, even if the existing term loan were converted into a DIP," continued Frohnhoefer.

"The equity holders want to see a refinancing: it is their one chance, in our view, of recovering any value. And they would likely prefer any accompanying dilution than putting up too much new capital. We maintain our rating, and struggle to see any fundamental reason for the stock move absent a palpable term sheet," he added.

For an analyst ratings summary and ratings history on RadioShack Corp. click here. For more ratings news on RadioShack Corp. click here.

Shares of RadioShack Corp. closed at $1.09 yesterday.

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