Sunday, October 12, 2014

Comment on the Radio Shack Comment $RSH

A commenter on the howardroark / Radio Shack comment post:

"It is abundantly clear that there is a shortage of good collateral for both the first and second lien paper (hence the reserves by GE against the borrowing base when they owned the loan that was recently sold to Standard General).

Given that, the only two rational responses for Salus are 1) liquidate the company or 2) force the company to add more collateral in a position junior to them before they relent on the ability to close stores. Hence the stalemate, the company doesn't want to liquidate and every store closing dilutes Salus' collateral position (since store inventory proceeds are usually consumed by lease expenses.)

Salus is better off with the company in BK and the landlords taking a significant share of the liability cram down."

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