Radio Shack has taken a step back from the brink.
The electronics store has reached an agreement with a group of lenders led by New York hedge fund Standard General to refinance $585 million in debt, according to a person familiar with the matter.
The agreement, expected to be announced soon, is designed to give RadioShack enough cash to get through the all-important holiday season, when retailers generate the bulk of their profits.
Under the terms of the deal, Standard General and other lenders will replace a $585 million loan facility RadioShack has with GE Capital, the lending arm of General Electric, the person said.
Standard General is RadioShack’s largest shareholder, and owns 10% of the company.
The move gives RadioShack access to much-needed cash and should help stave off bankruptcy as it continues to execute a turnaround plan.
Trading in RadioShack shares was halted Friday. The stock, which trades for less than $1 per share, is down more than 60% so far this year.
RadioShack executives have been in talks with creditors, investors and landlords to buy time for their turnaround plan. But the clock is ticking. Credit rating agency Moody’s has said it expects the company to run out of cash by the fall of 2015.
While the refinancing deal provides some relief, it remains to be seen if RadioShack can pull itself out of a prolonged slump in sales. The company is widely seen as outdated and is struggling to compete with larger rivals and online retailers such as Amazon.
RadioShack now depends on smartphones and tablets for more than half its sales. Those are competitive, low-margin products.
Smartphones are also cutting into the sales of higher-margin products, such as digital cameras and GPS systems.
The new credit arrangement could also mean that the RadioShack location near you will close. Part of the reason it needs cash is to close money-losing stores. Closing stores takes cash — to pay severance, to get out of leases and to dispose of inventory.
In March, the company announced it needed to close 1,100 stores, or about 20% of its total. But three months later, it was forced to scale back to only 200 store closings when lenders balked at providing the cash needed to close more stores.
RadioShack declined comment.
— CNNMoney’s Chris Isidore and Aaron Smith contributed to this report.
