RadioShack Corp (NYSE:RSH) said it received a notice from lender Salus Capital Partners accusing it of breaching covenants on a $250 million term facility, claims the troubled electronics retailer called "wrong and self serving."
Trading in RadioShack's shares was halted.
Continue Reading Below
The claims were related to a recapitalization and investment agreement and amendment to the company's credit facility on Oct. 3, RadioShack said.
The company has been trying to turn around its business by closing unprofitable stores to cut costs. However, it has been unable to get approval from lenders and creditors to close 1,100 stores.
RadioShack said on Tuesday lenders refused to approve the store closures unless it paid significant fees, prepaid a substantial portion of its debt and agreed to other covenants and concessions it considered "unreasonable".
The company estimated the store closures could add about $83 million to its earnings before interest, taxes, depreciation and amortization and create $87 million of liquidity.
RadioShack said Salus had already reaped more than $35 million in fees and interest from the facility it provided the company last year with Cerberus Business Finance.
A group of investors led by Standard General LP replaced GE Capital as RadioShack's lead lender in October, allowing the retailer to tap more funds ahead of the crucial holiday shopping season.
RadioShack, which announced plans in June to close 200 stores annually over the next three years, called on Salus to rescind the covenant breach notice and related demands, and approve its restructuring plan.
RadioShack shares were last traded at 77 cents on the New York Stock Exchange on Tuesday. Up to Monday's close, the stock had fallen 70 percent this year.
(Reporting by Sruthi Ramakrishnan in Bengaluru; Editing by Kirti Pandey)