RSH - Radio Shack

[enoch01]

I have been buying the 2019 bonds.

[DCG]

I still don't understand why this company thought it was a good idea to spend over $8 million on Super Bowl ads.

[Orange]

I still don't understand why this company thought it was a good idea to spend over $8 million on Super Bowl ads.

 

Desperation

[siddharth18]

I'm looking at RSH and wondering if straddle is a good play here.

 

Specifically: Jan 2016 $1 call for $0.45 and Jan 2016 $1 put for $0.40

 

So the only bet here is that by Jan 2016, RSH's market price will either be worth $0 (in which case you make $0.15) or worth more than $1.85 (in which case you profit).

 

Anyone with a good knowledge of RSH's bond-maturities and liquidity/solvency care to comment? How will the share price react to a dilution followed by a reverse-split?

[tinhb]

I would like to ask a stupid question: what will happen to small/retail bondholders when the company goes bankrupt?

 

Do we just sit there and wait for the distribution or are there any legal expenses? Does anyone have specific cases as examples?

 

Applying this to RSH, if I own around $10,000 worth of bond, what will happen when RSH goes bankrupt?

[thelads]

Its not a stupid question at all. In bankruptcy, should it get there, a bondholder committee and equity committee (of largest groups of holders of each) will likely be established. The choice then will be whether to restructure (convert a large part or all of the debt to equity - depends on secured vs unsecured and likely just 0 the equity). Or liquidate - so sell all the assets and pay down the creditors/equity in order of priority (taxes, bk fees, secured credit (the ABL), unsecured creditors (you, suppliers, other claimants) and then if anything left over, distribute to equity.

 

When the company defaults the debt will trade it will just be a lot less active and will be a claim on the company estate in bankruptcy. As such the value could fluctuate up and down even after BK. For example, Lehman claims are still actively traded.

 

When bankruptcy occurs, it will all be documented. You can follow it as all the docs relating to the BK will be available on PACER. You have to pay a little but it is incredibly informative. Then it is up to you to hold on for Restructure, Liquidation or just selling your bond/claim - depending on what you think ultimate recovery might be. Hope this helps.

[tinhb]

Thanks a lot thelads. Your comments are very helpful. I woud say RSH is a pretty interesting case. If the bond price gets depressed enough, it could be like kmart bankruptcy.

[thelads]

Yes Perhaps. One thing to watch in RSH though in comparison to say Kmart or GGP. In those cases they both had very very long leases, or owned properties. The leases were well below market (so had huge positive value) and the property owned was held well below value on the book. for RSH - the leases are extremely short term in length. so there is really no real estate value at all. Thats why I think if they do go liquidation may well be the choice. This is just a brand for selling stuff. The main assets are inventory. Just my 2 cents, and I am more often wrong than right. IF they do turnaround the stores then this is an incredible opportunity. But I am not sure they will. That said - some of the updated stores actually look really good. They just dont have the cash to do the roll out of that en masse. The next 6 months are crucial. With the roll out of a new iphone and new samsung (and other phones) along with the push into health based peripherals for both (which in the past has been RSH's strong suit- peripherals) it could drive traffic and give them some runway. Should be interesting for sure.

[krazeenyc]

Decided to take a tiny (0.1%) speculative position here via the Jan 16 0.5 Calls.

 

I think the calls are too inexpensive given the binary nature of the outcome.  You're only paying a 4-5 cent (7-9%) premium to protect 45 cents of additional downside. The potential upside is obvious given a company that has $3B+ in sales and has an equity value of only $65M.  I think you have a reasonable chance to make 6x - 10x or of course lose it all. 

 

Looking at another company out there in a similar position --  American Apparel. They're trading at .90 a share, and the bid on their Feb 2015 $2.50 calls is $0.15 (ask is $.20).

[krazeenyc]

Decided to take a tiny (0.1%) speculative position here via the Jan 16 0.5 Calls.

 

I think the calls are too inexpensive given the binary nature of the outcome.  You're only paying a 4-5 cent (7-9%) premium to protect 45 cents of additional downside. The potential upside is obvious given a company that has $3B+ in sales and has an equity value of only $65M.  I think you have a reasonable chance to make 6x - 10x or of course lose it all. 

 

Looking at another company out there in a similar position --  American Apparel. They're trading at .90 a share, and the bid on their Feb 2015 $2.50 calls is $0.15 (ask is $.20).

 

The Jan 2016 $2.00 calls are now more expensive than the Jan 2016 $.50 calls were a few days ago.  For what it's worth I don't think  things will work out for RSH. I just think the options were too cheap -- disregarding the potential short term upside volatility

[krazeenyc]

Decided to take a tiny (0.1%) speculative position here via the Jan 16 0.5 Calls.

 

I think the calls are too inexpensive given the binary nature of the outcome.  You're only paying a 4-5 cent (7-9%) premium to protect 45 cents of additional downside. The potential upside is obvious given a company that has $3B+ in sales and has an equity value of only $65M.  I think you have a reasonable chance to make 6x - 10x or of course lose it all. 

 

Looking at another company out there in a similar position --  American Apparel. They're trading at .90 a share, and the bid on their Feb 2015 $2.50 calls is $0.15 (ask is $.20).

 

The Jan 2016 $2.00 calls are now more expensive than the Jan 2016 $.50 calls were a few days ago.  For what it's worth I don't think  things will work out for RSH. I just think the options were too cheap -- disregarding the potential short term upside volatility

 

I think the calls are no longer underpriced

[ccplz]

Any opinions on their $325mm 6.75% bonds? I've been meaning to read the prospectus (http://www.sec.gov/Archives/edgar/data/96289/000119312511269536/d225423d424b3.htm), but haven't gotten around to it. They're trading at 10 cents on the dollar. I assume the brand and leases are worth more than $32mm. IIRC the inventory is encumbered by a revolver and there can't be much cash left.

 

[muscleman]

Any opinions on their $325mm 6.75% bonds? I've been meaning to read the prospectus (http://www.sec.gov/Archives/edgar/data/96289/000119312511269536/d225423d424b3.htm), but haven't gotten around to it. They're trading at 10 cents on the dollar. I assume the brand and leases are worth more than $32mm. IIRC the inventory is encumbered by a revolver and there can't be much cash left.

 

From the latest 10-Q, they have 666 M inventory and 841 M long term debt. So other than this 325 M bonds, what are the reset of the debt?

I assume in a liquidation case, the inventories got sold at 330 M. Long term debt got a 70% haircut, which means the debt is trimmed to 252 M. This leaves the room of 64 M buffer. But there are operating leases to pay as well, and they were 588 M at 2013 year end. I don't know how much is it right now. Assuming they could sublease at a 50% loss, then this is another 280 M.

 

On the other hand, if they get on the 500 M DIP financing and keep operating and burning their assets, I don't think there is much left for the 325 M bond holders. The DIP holders have the first priority on everything.

 

[muscleman]

http://www.bloomberg.com/news/articles/2015-02-02/radioshack-is-said-to-discuss-liquidation-as-part-of-sprint-deal]http://www.bloomberg.com/news/articles/2015-02-02/radioshack-is-said-to-discuss-liquidation-as-part-of-sprint-deal

 

I guess how much it could be sold to sprint will impact the outcome of the RadioShack's senior unsecured bonds' recovery rate. I assume account payable and Accrued expenses rank ahead of the senior unsecured debt.

In addition, here is a list of long term debt:

2018 Credit Facility  233 M

Credit facility term loan due in December 2018 50 M

Term loan due in December 2018 250 M

6.75% unsecured notes due in May 2019  325 M

 

Does anyone know the ranks of these debt? I will do more reading this evening but it will be great if someone could share the knowledge.

 

RSH is burning $130 M per quarter, so the equity right now should be around -$310 M. Assuming a 50% haircut of inventory and $100 M bankruptcy legal costs and store closing costs (Is that realistic?), then equity is -$810 M. In that case it sounds like the long term debts do not stand any chance.

 

I think it all depends on how the RSH-Sprint deal works out. If sprint buys the stores with inventory and assumes the debt, it could be a totally different story.

[muscleman]

http://www.prnewswire.com/news-releases/radioshack-reaches-asset-purchase-agreement-with-affiliate-of-standard-general-to-acquire-up-to-2400-stores-300031940.html

 

Anyone knows the details of this deal? I assume the store leases are sold, but the new buyer would not take over any existing inventory or liability. How much may the unsecured senior bond recover?

[rkbabang]

For your nostalgia fix.  This site has Radio Shack catalogs going all the way back to 1939.

 

http://www.radioshackcatalogs.com

 

[merkhet]

Looks like Standard General is running the show.

 

http://www.wsj.com/articles/radioshack-rescue-deal-clears-bankruptcy-court-1427830159

 

Good luck to them. They're going to need it.

[Phoenix01]

Joe Magnacca, who led a last-ditch effort to resuscitate RadioShack Corp., stepped down as chief executive officer Wednesday, a day after a bankruptcy judge signed off on the sale of about 1,740 stores to a New York hedge fund.

 

Read more here: http://www.star-telegram.com/news/business/article17096531.html#storylink=cpy

[Phoenix01]

RadioShack Statement Regarding Stock Price and Trading Volume

March 12, 2015 6:46 AM ET

FORT WORTH, Texas, March 12, 2015 /PRNewswire/ -- In light of the trading volume in its common stock at prices in

excess of $0.20 per share, RadioShack Corporation today reiterated its belief that there will be no recovery for any equity

holder in its pending Chapter 11 proceedings.

Equity holders of a company in Chapter 11 bankruptcy generally receive value only if all claims of a company's secured

and unsecured creditors are fully satisfied. RadioShack said it believes that the claims of its secured and unsecured

creditors will not be fully satisfied, leading to the conclusion that RadioShack common stock has no value.

 

A month after this press release from Radioshack, the stock is still trading at 30 cents.  There is even a bubble in bankrupt companies where they advertise that their stock is worth $0.  I guess people are getting used to negative yields and this seems like a quicker way of getting there. ;)

[muscleman]

RadioShack Statement Regarding Stock Price and Trading Volume

March 12, 2015 6:46 AM ET

FORT WORTH, Texas, March 12, 2015 /PRNewswire/ -- In light of the trading volume in its common stock at prices in

excess of $0.20 per share, RadioShack Corporation today reiterated its belief that there will be no recovery for any equity

holder in its pending Chapter 11 proceedings.

Equity holders of a company in Chapter 11 bankruptcy generally receive value only if all claims of a company's secured

and unsecured creditors are fully satisfied. RadioShack said it believes that the claims of its secured and unsecured

creditors will not be fully satisfied, leading to the conclusion that RadioShack common stock has no value.

 

A month after this press release from Radioshack, the stock is still trading at 30 cents.  There is even a bubble in bankrupt companies where they advertise that their stock is worth $0.  I guess people are getting used to negative yields and this seems like a quicker way of getting there. ;)

 

I've seen this again and again. GM went bankrupt in 2009 and its stock lingered around 0.5 for a year before the wipe out.

American airline filed ch11 and the stock dived to 0.2, and the company also said the equity value could be 0. However later it merged with USAirways and the stock price jumped to $10.

 

It is hard to say. If you can find one investment like the AA stock, you will make an insane amount of money.

[BargainValueHunter]

RadioShack Statement Regarding Stock Price and Trading Volume

March 12, 2015 6:46 AM ET

FORT WORTH, Texas, March 12, 2015 /PRNewswire/ -- In light of the trading volume in its common stock at prices in

excess of $0.20 per share, RadioShack Corporation today reiterated its belief that there will be no recovery for any equity

holder in its pending Chapter 11 proceedings.

Equity holders of a company in Chapter 11 bankruptcy generally receive value only if all claims of a company's secured

and unsecured creditors are fully satisfied. RadioShack said it believes that the claims of its secured and unsecured

creditors will not be fully satisfied, leading to the conclusion that RadioShack common stock has no value.

 

A month after this press release from Radioshack, the stock is still trading at 30 cents.  There is even a bubble in bankrupt companies where they advertise that their stock is worth $0.  I guess people are getting used to negative yields and this seems like a quicker way of getting there. ;)

 

I've seen this again and again. GM went bankrupt in 2009 and its stock lingered around 0.5 for a year before the wipe out.

American airline filed ch11 and the stock dived to 0.2, and the company also said the equity value could be 0. However later it merged with USAirways and the stock price jumped to $10.

 

It is hard to say. If you can find one investment like the AA stock, you will make an insane amount of money.

GGP. No, not like the RSH or AA situations from a bankruptcy standpoint but the smart money loaded up in November 2008 at ~60¢. Wish I was that smart!