Electronics retailer RadioShack is in talks with shareholder Standard General LP to help the company obtain rescue financing to avoid bankruptcy. Standard General LP has increased their share in the company by 3% in order to provide a financing package to RadioShack.

RadioShack's Financial Option

RadioShack has made multiple attempts to try and change the company's financial outlook over the past year. These steps have included:

• Closing 600 stores in just 3 years
• Negotiating rent expenses with landlords
• Optimizing labor and store operating hours to reduce compensation expenses
• Working to reduce other expenses where possible
• Revamping the products offered
• Remodeling existing stores

Despite these actions, the company is still facing widening losses and disagreements over store closures by investors. The numbers behind the store's descent have caused shareholders to pull out, causing a 70% drop in the company's shares over the course of a year.

Role of Standard General LP

Standard General LP is known as the company that rescued clothing retailed American Apparel from bankruptcy earlier in 2014. The company is seeking to provide additional cash to RadioShack by issuing credit or equity to the company.

Standard General wants to refinance the $250 million loan that is owned by Salus Capital Partners LLC and Cerberus Capital Management LP.

The news that Standard General had taken an extended interest in RadioShack has caused shares of the company's stock to rise.

Chapter 11 Bankruptcy Filing

RadioShack is facing a Chapter 11 bankruptcy filing if it cannot figure out a way to raise enough cash to stay afloat. A Chapter 11 bankruptcy filing for businesses means that the long-term revenue of the business will be greater than the liquidation of assets. If creditors allow the business to work out a payment plan, they stand to gain more money. Debt is able to be reorganized and worked out so the company can emerge as a healthy company.

All assets and debts that the company needs protection from must be made public. Creditors will be contacted to renegotiate interest rates of loans and dollar amounts of payments. The business is unable to make any sales that would be outside the normal business operations of the company, but does not have to liquidate as it would in a Chapter 7 bankruptcy filing.

If the company does move forward with a Chapter 11 bankruptcy filing, the company will turn over major decisions to a bankruptcy court. Creditors will be able to weigh in and propose plans to reorganize the company in order to see a return on their investment.

Around 10-15% of Chapter 11 bankruptcy filings are successful. Those that are not are dismissed or converted into Chapter 7 bankruptcy.