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8-K - 8-K - RS Legacy Corp | d834489d8k.htm |
TERM
LENDERS CLAIMED DEFAULTS
Exhibit 99.1 |
Table
of Contents
Overview
Claimed Defaults
RadioShack Position
Forward-Looking Statements
2 |
Overview
Claimed defaults purportedly arise under RadioShacks $250 million term loan
facility
closed
on
December
10,
2013,
with
lending
affiliates
of
Salus
Capital
Partners and Cerberus Business Finance (the Term Lenders)
Notice
delivered
by
Salus
Capital
Partners,
as
the
agent
for
the
Term
Lenders
Notice alleges breaches of certain covenants, demands immediate payment of
all
amounts
owing
to
the
Term
Lenders
and
asserts
other
remedies
under
the
Credit Agreement with the Term Lenders (the SCP Credit Agreement)
RadioShack disagrees with the assertions that any event of default has
occurred
Accordingly, RadioShack does not believe that the demand for immediate
payment or any other exercise of remedies has any merit
The lenders holding a majority of the loans and commitments under
RadioShacks ABL credit facility have indicated that they intend to continue
to extend credit to RadioShack in accordance with the terms of the ABL
credit facility
3 |
Claimed Defaults
1.
Entry into the October 3, 2014 Recapitalization Agreement
and the Amendment to RadioShacks ABL Credit Facility
allegedly
constituted
prohibited
affiliate
transactions
2.
Conversion of revolving loans to term loans under the ABL
Credit Facility allegedly resulted in a permanent reduction in
revolving commitments causing an impermissible over-
advance
3.
Amendment to ABL Credit Facility allegedly breached the
term loan facility by making limitations on RadioShacks ability
to make payments under the term loan more restrictive
4.
A borrowing base certificate delivered by RadioShack under
the ABL Credit Agreement allegedly overstated the ratio of
the liquidation value of inventory to the cost of such inventory
resulting in additional credit being made available to
RadioShack in violation of the SCP Credit Agreement
4 |
RadioShack Position
RadioShack believes that no event of default has occurred under
the SCP Credit Agreement and that the demand for immediate
payment or any other exercise of remedies is without merit
The
following
pages
set
forth
the
Term
Lenders
claims
and
RadioShacks position
5 |
RadioShacks Position on
Affiliate
Claim
Term Lenders
Claim
Entry into Recapitalization
Agreement and Amendment to
RadioShacks ABL Credit Facility
constituted prohibited transactions
with affiliates
of RadioShack
because of Standard Generals
participation and other mattters
RadioShacks Position
Neither General Retail Holdings
(GRH) nor General Retail
Funding (GRF), the parties to the
Recapitalization Agreement and
Amendment at issue, is an
Affiliate
as defined in the SCP
Credit Agreement
6 |
RadioShacks Position on
Affiliate
Claim
Term Lenders
Claim
GRH and GRF are Affiliates
because investors in such entities
allegedly own more than 10% of
the voting stock of RadioShack
RadioShacks Position
7
The stock ownership of GRH and
GRF is 0%; conflating GRH and
GRF with Standard General or other
investors ignores their status as
separate, substantial legal entities
owned by disparate persons
Even under expansive Schedule
13D
concepts of beneficial
ownership
which are not
applicable in the SCP Credit
Agreement definition of Affiliate
Standard General owns less than
10% of RadioShacks voting stock |
RadioShacks Position on
Affiliate
Claim
Term
Lenders
Claim
GRH is an Affiliate
because it has
the power to direct or cause the
direction of the management and
policies of RadioShack
RadioShacks Position
8
The power to direct or cause the direction of the
management and policies of RadioShack is
vested as a matter of law in RadioShacks Board
of Directors
GRH had no representation on RadioShacks
Board of Directors, much less control of the
Board, on October 3
rd
and doesnt today
The RadioShack Board acted deliberately and
independently
GRHs
right
to
designate
directors
if
the
transactions contemplated by the
Recapitalization Agreement occur next year did
not give GRH control over RadioShack on
October 3
rd
or today |
RadioShacks Position on
Affiliate
Claim
Term Lenders
Claim
GRH is an Affiliate
because it
has the power to direct or cause
the direction of the management
and policies of RadioShack
RadioShacks Position
9
The transaction committee consisting of
three RadioShack representatives and
three GRH representatives does not confer
control to GRH
GRH does not control the committee and
the committee does not control
RadioShack; the committee has only
limited oversight and coordination
functions; it has no power to direct the
management or policies of, or obligate,
RadioShack |
RadioShacks Position on
Affiliate
Claim
Term Lenders
Claim
RadioShacks covenants in the
Recapitalization Agreement to
indemnify its directors and officers
allegedly constitute impermissible
transactions by RadioShack with its
Affiliates
RadioShacks Position
Covenants are between RadioShack and
GRH, not
between RadioShack and its
directors and officers
Covenants are not transactions; they did not
require any action by RadioShack and may not
ever require any action by RadioShack
Covenants dont change pre-existing
indemnification and related rights granted to
RadioShacks directors and officers under
RadioShacks bylaws and individual
indemnification agreements
Covenants are customary and permitted under
ordinary course exception contained in the
SCP Credit Agreement
10 |
RadioShacks Position on
Over-Advance Claim
Term Lenders
Claim
Conversion of revolving loans to
term loans under ABL Credit
Facility resulted in a permanent
reduction in revolving
commitments causing
impermissible over-advance
RadioShacks Position
The aggregate amount of
Revolving Loan Commitments
remains $535 million
Revolving Loan Commitments, as
defined in the SCP Credit
Agreement, were not permanently
reduced under the Amendment
Lenders holding Revolving Loan
Commitments made revolving
loans, which were converted to
term loans
11 |
RadioShacks Position on
Payment Restriction Claim
Term Lenders
Claim
Amendment to ABL Credit Facility
breached the term loan facility by
making limitations on
RadioShacks ability to make
payments under the term loan
more restrictive
RadioShacks Position
The changes did not make
applicable provisions limiting
RadioShacks ability to make
payments under the term loan
more restrictive in any respect
12 |
RadioShacks Position on
Borrowing Base Claim
Term Lenders
Claim
A borrowing base certificate
delivered by RadioShack under
the ABL Credit Agreement
allegedly overstated the ratio of
the liquidation value of inventory to
the cost of such inventory resulting
in additional credit being made
available to RadioShack in
violation of the SCP Credit
Agreement
RadioShacks Position
RadioShack has never reflected
an inventory liquidation value on
its borrowing base certificate that
was not permitted by or was
otherwise inconsistent with the
inventory appraisal obtained by the
ABL Agent and then in effect in
accordance with the terms of the
ABL Credit Agreement and other
related loan documents
13 |
Forward-Looking Statements
14
This presentation contains forward-looking statements, as referenced in the
Private Securities Litigation Reform Act of 1995. These forward-looking
statements reflect managements current views. These statements can be
identified
by
the
fact
that
they
include
words
like
our
position,
RadioShacks
position,
expect
and
other
words
with similar meaning, and include all statements regarding RadioShacks
position as to the alleged defaults described above. These statements
involve risks and uncertainties that could cause actual outcomes or
circumstances to differ materially from those expressed or implied in this
presentation, including (1) that the ultimate determination of these matters
is outside of RadioShacks control and may be influenced by facts
unknown to RadioShack, and as such RadioShack may be unable to successfully dispute
the allegations of defaults under the term loan credit facility, (2) the
potential consequences of those allegations, including the exercise of
lender remedies, (3) potential adverse effects on relationships between the Company and its business
partners, other creditors (including in relation to cross-default provisions in
our other credit agreement or debt indenture)
and
third
parties,
including
suppliers,
employees
and
customers,
(4)
the
potential
inability
of
the
Company to successfully complete the proposed restructuring transactions, refinance
its debt and the Companys turnaround plan, and (5) the continued
availability of working capital financing. Any or all of these matters would
have a material adverse effect on RadioShacks liquidity and financial
viability. Additional information regarding risk factors relevant to
RadioShack is included in RadioShacks filings with the SEC, including its most recent Annual
Report
on
Form
10-K
for
the
year
ended
Dec.
31,
2013
and
Quarterly
Reports
on
Form
10-Q.
RadioShack
specifically
disclaims
any
duty
to
update
any
of
the
information
set
forth
in
this
presentation,
including
any
forward-
looking statements.
The description of the Notice of Default and related claims included in this
presentation are qualified by its entirety by reference to the Notice of
Default dated December 1, 2014, a copy of which was filed as an exhibit to a Current
Report on Form 8-K, filed by the Company with the SEC on December 2,
2014. |