Dive Brief:
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The International Swaps and Derivatives Association Friday backed RadioShack's CEO and unanimously agreed that the electronics retailer didn’t default on its loan from Salus Capital when it entered into a refinancing agreement with Standard General in October.
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Salus Capital had accused the struggling retailer of default and demanded early payment of its $250 million, which could have been a financially fatal blow.
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As news of the payment demand spread last week, RadioShack’s credit default spread widened 144%, indicating that an increasing number of investors were betting that the retailer would be in default.
Dive Insight:
RadioShack received something of a reprieve Friday, but it must still get the go-ahead from lenders to close stores; Salus Capital is among those lenders. The electronics retailer has been trying to shave costs in other ways, including ending its employee 401(K) retirement savings matching program and cutting its marketing budget, but it likely needs the liquidity that store closings can provide. So far, RadioShack has closed just 175 of the 1,100 stores it says it must close to help regain its footing.
Indeed, Friday the retailer also renewed its warnings that it could be forced to pursue bankruptcy as it registered a potential rights offering with the Securities and Exchange Commission.
