RadioShack is reportedly working on a deal to sell half its stores to Sprint and liquidate the rest before declaring bankruptcy and facing its debtors

RadioShack is reportedly in talks to sell half of its to Sprint before going out of business, a deal that would put an end to years of decline at the struggling retailer and give Sprint a boost in its efforts to increase its retail footprint. Bloomberg reports that the deal is still at a stage where it might not come together, and neither company has publicly commented so far. RadioShack is down 18% in trading today, but the percentage is high because RadioShack is trading at just $0.23.

RadioShack Corporation In Talks To Sell Half Its Stores To Sprint [REPORT]

RadioShack is close to going under, while Sprint wants to increase its store count

There have been rumors for a couple of weeks that RadioShack was in talks to sell its stores, and that the counterparty in the negotiations might be Sprint, and since Bloomberg reported those rumors it’s a good bet that we’re hearing from the same anonymous source. This does make it sound like the talks are further along (the number of stores that would be sold to Sprint is a new detail), but it’s probably not independent confirmation. Investors seem to be acting on the new reports, but then sentiment on RadioShack (it was trading around $2 a year ago and $20 five years ago) hasn’t been high in a very long time.

Signs have been pointing to RadioShack declaring bankruptcy

There have been some other big signs that RadioShack was finally looking to shut down its operations. When the last CFO resigned (giving the company a small boost) he was replaced with AlixPartners Managing Director Holly Etlin, who was involved in restructuring efforts at Borders, Freedom Communications, New Century Financial, Tanner & Haley and Winn-Dixie Stores, all of which ended with the companies filing for bankruptcy.

More recently, Salus Capital Partners offered RadioShack a $500 million debtor-in-possession loan to finance bankruptcy proceedings, which is about as strong a hint as a debtor can give. According to the Bloomberg report Standard General would provide bankruptcy financing if the deal goes through so that it can recover some of the money it lent last year. Apparently the rationale behind liquidating any stores not sold to Sprint is to avoid costly courtroom battles over control of the company, though it’s hard to imagine RadioShack’s bankruptcy proceeding without legal wrangling.