RadioShack prepares for bankruptcy, considers selling stores to Amazon, Sprint

Following talks of filing for bankruptcy protection, RadioShack (NYSE:RSH) is now contemplating selling some of its store leases to Sprint or Amazon. Both retailers have made recent announcements that they are looking to expand their physical presence and could seize this opportunity.

Last month, Sprint revealed that it was interested in purchasing between 1,300 and 2,000 RadioShack locations, leaving the retailer to shutter the remaining locations. The retailers also discussed the possibility of co-branding the stores, reported Bloomberg. Or perhaps creating a store-within-store so that the RadioShack brand could stay alive.

But other retail bids should not be discounted at this point. Amazon has already thrown its hat in the ring. Amazon has shown interest in using the physical space to display hardware: tablets, e-readers, smartphones, etc. or as potential pick-up and drop-off centers for online shoppers, reported Bloomberg.

Amazon has recently stepped into the physical store space when it announced last October that it would open its first brick-and-mortar in New York City.

"It's a reality check for e-commerce giants like Amazon, who are quickly realizing the limitations of an online-only strategy. The majority of consumers still need to touch and feel the product and get reassurance that they're making the right choice--both of which are nearly impossible to replicate without a face-to-face interaction in a store," said Gary Ambrosino, president and CEO of TimeTrade.

While the future of RadioShack's locations are not clear, the retailer will have to make a decision soon. A sign of escalating woes, the New York Stock Exchange suspended trading of the company's stock on Monday for failing to submit a business plan that would address its lack of compliance with NYSE rules.

RadioShack has been trying to dig itself out of the hole for some time now. Earlier this week, Standard General emerged as the lead bidder at a bankruptcy auction for RadioShack, according to people familiar with the sources. After 11 straight quarters of losses, RadioShack plans to file for Chapter 11 bankruptcy protection, but is still working out the details of the agreement. RadioShack currently has 4,300 stores in the United States and will need to close many of them to complete the deal.

Back in October, the retailer received a rescue financing package from Standard General and at the same time announced it would serve as the lead bidder in a filing in debtor-in-possession financing. It also included a $535 million first-lien loan.

However, Standard General is not the only stakeholder trying to gain more control of the floundering retailer.

In January, RadioShack received an unsolicited $500 million loan offer from Salus Capital, if the company agreed to file for bankruptcy. If the loan was accepted, it would replace the retailer's existing $585 million asset-backed credit line. To further its stake in RadioShack, Salus also recently accused the retailer of breached covenants on a $250 million term loan, though RadioShack contested the claims. Salus Capital is attempting to get a bigger piece of the retailer's debt in exchange for agreeing to back the company's store-closing plan.

For more:
-See this Bloomberg article
-See this Bloomberg article

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