Radioshack Announces Milestone In Recapitalization Process

FORT WORTH, Texas, Oct. 3, 2014 /PRNewswire/ -- RadioShack Corporation (NYSE: RSH) today announced that it has entered into definitive agreements to restructure a portion of its existing debt, providing additional near-term liquidity and serving as a first step in a stronger foundation for the Company's continued business transformation. 

Standard General LP and certain other investors have replaced GE Capital as lead lender under RadioShack's senior secured asset based credit facility ("ABL Facility") which will allow immediate access to additional liquidity.  Other investors, including RadioShack shareholders Standard General and Litespeed Management LLC, are providing $120 million to be used to cash collateralize letters of credit for the Company.  In the coming months, this $120 million is expected to be converted into equity.  Current shareholders will have the opportunity to participate in a rights offering at same conversion price. 

"We are pleased to complete this important step, which we believe positions us to continue to progress our operational turnaround," said Joe Magnacca, RadioShack's chief executive officer.  "We recognize that we will need to address constraints under our existing term loan in order to undertake a store base consolidation program and pursue other measures to reduce our cost structure.  This amended ABL Facility provides time to pursue a longer-term restructuring.  To that end, we are in constructive discussions with our term lenders, led by Salus Capital, toward additional steps to recapitalize RadioShack.

"We look forward to continuing to serve our customers with differentiated products and an upgraded shopping experience as we move into the Holiday season." 

Today's agreements include two key elements:

• ABL Facility – Standard General and certain other investors have acquired the loans and agreed to changes affecting the credit availability under RadioShack's existing ABL Facility.  As a result, RadioShack believes that it will have sufficient credit capacity under the ABL Facility to fund its inventory build for the Holiday season.  Because borrowing availability under the amended ABL Facility changes in March 2015, the Company expects to seek to refinance the facility by that time.  In addition, the amended ABL Facility will be required to be refinanced if the rights offering described below is not completed by March 15, 2015.
• New equity – The $120 million investment is expected to be converted into equity securities representing (together with related fees payable in equity securities) not less than 50% of the Company's outstanding equity securities upon satisfaction of certain conditions.  These conditions include the modification of a supplier contract, at least $100 million of available cash and borrowing capacity at January 15, 2015, development of a fiscal 2016 plan satisfying certain requirements and the completion of a rights offering to existing RadioShack shareholders to purchase equity securities at a price of $0.40 per common share equivalent. 

The percentage of equity securities that Standard General and other investors will own as a result of this transaction will depend upon the level of participation, if any, of existing shareholders in the rights offering.  If no shares were purchased in the rights offering, existing shareholders would own 20% of RadioShack's equity securities.  The voting rights of any person or group acquiring equity securities in the transaction would be limited to 34.9% of the total voting power of the Company's voting stock so long as greater voting power would accelerate Company debt.

If the $120 million investment is converted into equity, the Board will be reconstituted to consist of the Company's CEO, two independent directors selected by RadioShack and four individuals nominated by Standard General.  The new directors must be approved by the Company's corporate governance committee.  At least two of these directors must be independent.

RadioShack intends to initiate the rights offering late this year or in early 2015.  There can be no assurance that the rights offering will be completed or that the other conditions to the equity conversion will be satisfied, nor can the Company be certain that it will be able to refinance borrowings under the amended ABL Facility by March 2015.

NYSE EXEMPTION

The stock issuances described above would normally require approval of RadioShack's shareholders pursuant to the Shareholder Approval Policy of the New York Stock Exchange (the "Exchange"). The audit and compliance committee of RadioShack's Board of Directors determined that the delay that would result from securing shareholder approval prior to the completion of these stock issuances would seriously jeopardize the financial viability of RadioShack. Because of that determination, the audit and compliance committee, pursuant to an exception provided in the Exchange's shareholder approval policy, expressly approved RadioShack's omission to seek the shareholder approval that would otherwise have been required under that policy. The Exchange has accepted the Company's application of the exception.

In conjunction with the rights offering, RadioShack intends to initially issue equity securities that would be convertible, subject to the satisfaction of all applicable conditions, into at least 400 million shares (and up to 700 million shares) of common stock. In reliance on the Exchange's shareholder approval exception, RadioShack will notify its shareholders of its intention to issue the shares without seeking their approval at least ten days prior to the issuance of the shares.

CERTAIN LEGAL MATTERS

The securities to be offered in the rights offering will be offered pursuant to a registration statement to be filed with the SEC and a related prospectus. This press release does not constitute an offer to sell or the solicitation of an offer to buy, nor will there be any sales of, such shares in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to the registration or qualification under the securities laws of any such state or other jurisdiction.

This press release does not set forth all of the terms and conditions of the issuances of shares and other transactions contemplated by the recapitalization agreements described above.  The material contracts relating to these matters will be filed by the Company with the SEC.

This press release contains information about a pending transaction, and there can be no assurance that this transaction will be completed.

ADVISORS

RadioShack's financial advisor is Peter J. Solomon Company and its legal counsel is Jones Day.  Lazard Feres and Co. is acting as the financial advisor to RadioShack's Board of Directors.  Debevoise & Plimpton LLP is legal counsel to Standard General.  Blank Rome LLP advised investors of the ABL Facility.

FORWARD LOOKING STATEMENTS

This press release contains forward-looking statements, as referenced in the Private Securities Litigation Reform Act of 1995. These forward-looking statements reflect management's current views and projections regarding economic conditions, the retail industry environment and RadioShack's performance. These statements can be identified by the fact that they include words like "anticipate," "believe," "estimate," "expect," "intend," "project," "guidance," "plan," "outlook" and other words with similar meaning. We specifically disclaim any duty to update any of the information set forth in this press release, including any forward-looking statements. These statements involve a number of risks and uncertainties that could cause our actual results to differ materially from the results discussed in our forward-looking statements, including the risk that the transactions described herein may not be consummated, including a failure to satisfy each of the conditions to the conversion of the $120 million investment into equity securities of the Company, the refinancing of the amended ABL Facility, the completion of the rights offering and the continued availability of working capital financing.  The failure to complete these transactions would have a material adverse effect on RadioShack's liquidity and financial viability. Additional factors that could cause our actual results to differ materially from the results discussed in our forward-looking statements include, but are not limited to, our ability to execute and the effectiveness of our initiatives, including our strategic turnaround plan and our proposed store closure program; the underperformance or loss of certain of our important vendors, such as our wireless carrier providers, or breaches by them of our agreements with them; difficulties associated with our transition to an outsourced arrangement for the production of products we previously manufactured at our Chinese manufacturing plant; an adverse impact on our sales or profitability due to our transition to such an outsourced arrangement; an adverse impact on our sales or profitability due to changes wireless carrier providers make to their customer credit requirements, frequency of upgrade eligibility, or other operational matters, and the timing, completeness and accuracy of information we receive about such changes; a decline in our gross margin due to customer demand for lower margin mobile devices, such as smartphones and tablets; overall sales performance; economic conditions; product demand; expense levels; competitive activity; interest rates; changes in RadioShack's financial condition; availability of products and services and other risks associated with RadioShack's vendors and service providers; the regulatory environment; and other factors affecting the retail category in general. Additional information regarding these and other factors is included in RadioShack's filings with the SEC, including its most recent Annual Report on Form 10-K for the year ended Dec. 31, 2013.

ABOUT RADIOSHACK CORPORATION

RadioShack (NYSE: RSH) is a leading retailer focused on connecting customers with personalized solutions and discovering what's possible through the latest in consumer technology.  The company's updated product assortment incorporates national brands, industry-leading private brand products and in-demand mobile devices from a wide selection of wireless carriers.  Customers can shop top brands in headphones and speakers, wearable technology, smart toys and DIY supplies, connected home, power accessories and home entertainment at www.radioshack.com or in store.  RadioShack's global retail network includes more than 4,300 company-operated stores in the United States and Mexico and more than 1,200 dealer franchise stores in 25 countries.  RadioShack employs approximately 27,000 knowledgeable associates globally to help customers find their technology solutions.  For more information on RadioShack Corporation, please visit www.radioshackcorporation.com.  RadioShack® is a registered trademark licensed by RadioShack Corporation.

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SOURCE RadioShack Corporation

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