(Reuters) - RadioShack Corp RSH.N said a group of investors led by Standard General LP have replaced GE Capital as lead lender of its asset-based credit facility, in a move that will allow the struggling electronics retailer to tap more funds ahead of the crucial holiday shopping season.
Standard General, Litespeed Management LLC and other investors are also providing $120 million to be used to cash collateralize letters of credit for the company, RadioShack said in a statement.
The company said it would seek to convert the $120 million into equity “in the coming months”, following which RadioShack’s board would be reconstituted with the CEO, two independent directors selected by RadioShack, and four people nominated by Standard General.
Reuters reported earlier in the day that a group of investors replaced the $585 million debt facility provided by GE.
The equity conversion depends on changes to a supplier contract, at least $100 million in cash and borrowing capacity by Jan. 15, a financial plan for 2016 meeting certain requirements, and the completion of a rights offering of as much as 700 million shares.
RadioShack said it would not seek shareholder approval for the rights offering, citing an exception in the New York Stock Exchange’s policy.
While the amended credit facility provides RadioShack time to pursue a longer-term restructuring plan, it would still need to convince lenders to let it close stores and cut costs, Chief Executive Joe Magnacca said in the statement.
RadioShack shares were halted early in the day following reports of a refinancing.
RadioShack said last month that it may need to file for bankruptcy protection if its cash situation worsened.
The company said it was also exploring other options, including a sale or an investment, and liquidation as the last resort.
Standard General said last week it was in talks to improve RadioShack’s cash position.
The hedge fund also said it had raised its stake in RadioShack to 9.8 percent from 7.08 percent to become the company’s largest shareholder.
RadioShack has hired Peter J. Solomon Co as its financial adviser and Jones Day as its legal counsel.
Additional reporting by Ramkumar Iyer and Supriya Kurane; Editing by Sunil Nair and Ted Kerr