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I AGREE
06 Oct 2011
Approximately $700 million of rated debt securities affected
New York, October 06, 2011 -- Moody's Investors Service today revised RadioShack Corporation's
("RadioShack") outlook to negative from stable and affirmed
the company's Ba1 Corporate Family and Probability of Default Ratings,
and Ba2 rating of its senior unsecured notes and senior unsecured convertible
notes. RadioShack has an SGL-1 Speculative Grade Liquidity
rating.
"RadioShack's financial leverage is high for the rating category
and we do not expect the company's operating performance to reverse
its negative trend in the near to medium term and therefore expect margins
and credit metrics to continue to deteriorate", stated Moody's
Senior Analyst Mickey Chadha. "RadioShack's new Target
mobile centers which replaced the company's Sam's Club kiosks
have comparatively lower operating margins and will take time to generate
traction, further pressuring the company's bottom line and
credit metrics", Chadha further stated.
The following ratings are affirmed:
Corporate Family Rating at Ba1
Probability of Default Rating at Ba1
$375 million 2.5% senior unsecured convertible notes
due 2013 at Ba2 (LGD 4, 64%)
$325 million senior unsecured notes due 2019 at Ba2 (LGD 4,
64%)
Senior unsecured shelf rating at (P) Ba2
The negative outlook reflects RadioShack's lackluster operating
performance which has resulted in margin erosion and credit metrics that
are inconsistent with the current rating category. Moody's expects
the company's margins and credit metrics to remain under pressure.
Given the negative outlook, upward movement in RadioShack's
ratings is unlikely in the near to medium term. Stabilization of
the outlook could occur if operating margins reverse their declining trend,
liquidity remains very good, debt/EBITDA is sustained below 4.0
times and EBITA to interest is sustained above 3.0 times.
A higher rating would likely require improvements in operating performance
such that debt / EBITDA is sustained below 3.25 times and EBITA
to interest is sustained above 4.25 times.
A more aggressive financial policy, deterioration in liquidity and
a failure to stem erosion in operating margins could result in a downgrade.
Quantitatively ratings could be downgraded if debt / EBITDA is sustained
above 4.0 times or if EBITA to interest drops below 3.0
times.
The last rating action on RadioShack was on April 26, 2011 when
its senior unsecured notes were assigned a Ba2 rating and all other ratings
were affirmed with a stable outlook.
The principal methodologies used in this rating were Global Retail Industry
published in June 2011, and Loss Given Default for Speculative-Grade
Non-Financial Companies in the U.S., Canada
and EMEA published in June 2009. Please see the Credit Policy page
on www.moodys.com for a copy of these methodologies.
RadioShack is a retailer of consumer electronics and peripherals,
as well as a retailer of cellular phones. It operates 4,463
stores in the U.S. and Mexico and 1,481 wireless phone
kiosks in the U.S. The company also generates sales through
a network of 1,175 dealer outlets worldwide. LTM June 30,
2011 revenues were approximately $4.5 billion.
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Manoj Chadha
Vice President - Senior Analyst
Corporate Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Kendra M. Smith
MD - Corporate Finance
Corporate Finance Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Moody's revises outlook for RadioShack to negative from stable
No Related Data.
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