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Fitch lowers RadioShack to D
Fitch Ratings said it downgraded the long-term issuer default rating for RadioShack Corp. to D from C following the company's announcement that it has filed Chapter 11.
The agency also affirmed the CCC-/RR2 rating on RadioShack's $250 million secured term loan and the senior unsecured notes rating at C/RR6.
In addition, Fitch withdrew the ratings on the RadioShack's $535 million ABL facility and $50 million FILO term loan, which have been replaced by a new $285 million debtor-in-possession facility.
RadioShack entered into an asset purchase agreement with an affiliate of Standard General LP to acquire between 1,500 and 2,400 of the company's roughly 4,000 U.S. company-owned stores. Standard General has an agreement in principle with Sprint to establish a new dedicated mobility 'store within a store' in up to 1,750 of the acquired stores. The balance of the stores would be closed, though other bidders could submit offers for RadioShack's assets.
The company also entered into a $285 million debtor-in-possession financing from its current ABL lender group, led by DW Partners, LP. This facility includes a rollup of the company's prepetition revolver, letters of credit and FILO term loan.
Fitch said the ratings on the various securities reflect its recovery analysis, which is based on a liquidation value of RadioShack in a distressed scenario of $500 million as of Nov. 1, 2014. Most of the value comes from inventories, half of which are assumed to be mobile phones, which are assigned a liquidation value of 80%, and the balance is other inventories at a liquidation value of 60%. The agency uses a liquidation value of 30% for receivables to reflect the netting out of estimated payables to the wireless carriers.
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