S&P lowers Radio Shack

Standard & Poor’s said it lowered its corporate credit rating on Radio Shack Corp. to CCC from CCC+. The outlook is negative.

At the same time, S&P lowered the rating on the company’s senior unsecured notes to CC from CCC-, two notches below the corporate credit rating. The notes’ recovery rating remains a 6, which indicates an expectation of negligible (0%-10%) recovery of principal in the event of payment default.

“The downgrade reflects the company’s very weak operating trends, which have led to significant liquidity usage. Even if performance trends moderate, we expect the company to be using cash over the near term,” said S&P credit analyst Charles Pinson-Rose in a news release.

“We currently expect that the company has liquidity sources to finance the operating losses and working capital needs in the current fiscal year (ending January 2015), but the company would have very small amounts of liquidity early next year, which could lead to a liquidity crisis and default or the company’s decision to seek a financial restructuring.”

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