RadioShack Corp. (RSH:US), the electronics retailer with seven straight quarterly losses, proposed rates on portions of a $835 million loan it is seeking to refinance debt.
A $535 million asset-based revolving credit line will pay interest at 2 percentage points to 2.5 percentage points more than the London interbank offered rate, according to a person with knowledge of the deal, who asked not to be identified because the information is private. A $50 million so-called FILO loan that is repaid after the revolver will pay interest at 4 percentage points more than Libor.
The financing for RadioShack provides it with $175 million of additional liquidity as the retailer seeks to turn itself around, according to the Fort Worth, Texas-based company’s earnings statement last month. The lending arm of General Electric Co., which is arranging the financing, isn’t marketing to investors a $250 million second-lien term loan that is part of the deal, the person said.
Pricing on the new second-lien debt is probably more expensive than existing debt, according to Chuck Pinson-Rose, a credit analyst with Standard & Poor’s. “The company is in a stressed situation,” he said in a telephone interview.
Maggie Thill, a RadioShack spokeswoman who works for Weber Shandwick, declined to comment on the financing. Terms of the proposed second-lien piece weren’t disclosed.
RadioShack’s existing $100 million second-lien loan pays interest at 10 percentage points more than Libor, with a 1 percent floor on the lending benchmark, according to data compiled by Bloomberg. Its $75 million of first-lien term loans have a 4.5 percentage point spread, the data show.
The retailer has a $450 million asset-based revolver, arranged by Bank of America Corp. and Wells Fargo & Co., with a rate of 2.25 percentage points more than Libor, data compiled by Bloomberg show.
RadioShack’s earnings before interest, taxes, depreciation and amortization “plummeted deeply into negative territory” in the third quarter, according to debt researcher CreditSights, which said in an Oct. 23 report that the new loans don’t provide enough liquidity for its turnaround strategy and will “further subordinate” its unsecured notes.
The retailer’s 6.75 percent senior unsecured bonds due in 2019 fell 1.25 cents yesterday to 66.5 cents on the dollar to yield 16.1 percent, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority. The notes have plunged about 8 cents since Oct. 21, the day before RadioShack reported that losses (RSH:US) widened in third quarter.
Under a revolver, money can be borrowed again once it’s repaid; in a term loan, it can’t.
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