Fitch cuts RadioShack to low end of junk territory

Fitch pushes RadioShack deeper into junk territory after creditors block store closings

Associated Press

CHICAGO (AP) -- Fitch cut its rating on RadioShack less than a week after the retailer was checked by lenders in an aggressive effort to shutter almost 20 percent of its stores worldwide.

The rating agency said Thursday that without massive inventory liquidation, the company could experience new profit and cash-flow pressure.

In March, after revealing that its losses had blossomed last year, RadioShack said that it would seek to close more stores than originally agreed to with creditors. Instead of 200 store closings per year for a maximum of 600, RadioShack said that it needed to close as many as 1,100 stores.

Last week, however, the company said that it had failed to come to a new agreement with creditors and that it would try to cut costs elsewhere.

Fitch Ratings has grown increasingly concerned about the company's ability to operate beyond this year, citing "significant cash burn."

RadioShack had total liquidity of $555 million at the end of 2013, compared with $927 million in the previous year, according to the rating agency.

The company in March reported losses of $400 million for 2013, much wider than the $139 million in losses it posted in 2012.

Fitch dropped RadioShack's long-term issuer default rating two notches Thursday to "CC" from "CCC," near the bottom of junk territory.

The ratings agency said that it is increasingly likely that RadioShack will need to restructure its debt within the next 12 months.

A representative for RadioShack, based in St. Paul, Minnesota, could not be reached immediately for comment.

Shares of RadioShack Corp. fell 2 cents to $1.32 in afternoon trading. They have fallen almost 50 percent this year.

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