RadioShack kept alive via US$25b credit-default swaps

New York

RADIOSHACK Corp is finding an unlikely ally in its efforts to stay out of bankruptcy: credit derivatives traders who amassed more than US$25 billion of trades speculating how much longer it can keep paying its bills.

After a 60 per cent surge this year, the amount of credit-default swaps (CDS) tied to RadioShack is 28 times its debt, more than any other US company. When the retailer's biggest shareholder arranged US$585 million of funding in October to help it survive the holidays, much of the money came from hedge funds wagering on the company to avoid default, said people with knowledge of the trading. Those included DW Investment Management and Saba Capital Management, the sources said.