According to the Wall Street Journal, the reason for the change in plans is that the lenders who are providing RadioShack with the capital it needs to stay afloat disagree with the number of Shacks that should be closed.
In order to close more than 200 stores in a year, RadioShack needs approval from two lenders, Salus Capital Partners and GE Capital, who led a group of lenders in providing the company with an $835 million loan package last year.
The Journal says that the lenders were surprised when Shack CEO Joe Magnacca announced the plan to close one-quarter of the chain’s locations without seeking their approval. And in a recent regulatory filing, the company says it could not convince the lenders that all of these closures were merited.
“The terms on which the lenders are currently willing to provide this consent are not acceptable,” RadioShack explained. “The company is continuing with a plan to close fewer stores and pursuing other cost reduction measures.”
What the filing doesn’t say, but the Journal’s sources do, is that one of the sticking points of these negotiations involved how much money RadioShack would want to hold on to following the liquidation of these hundreds of stores.
RadioShack and Magnacca had been banking on these closures as a way to reboot the company. In its recent Super Bowl ad, the Shack openly admitted that its reputation was stuck in the ’80s, when electronics stores like RadioShack were seen more for hobbyists and enthusiasts than for everyday consumers.