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(Reuters) - RadioShack Corp's second-largest shareholder, Standard General LP, is negotiating a rescue package with investors to help the consumer electronics retailer ward off bankruptcy, Bloomberg reported, citing people with knowledge of the matter.
RadioShack shares were up 7.3 percent at 77 cents on the New York Stock Exchange on Tuesday.
The hedge fund is also working with RadioShack's management to help the company avoid a Chapter 11 filing, Bloomberg reported. (http://bloom.bg/1lcdK8E)
Standard General is seeking to strengthen RadioShack's cash flow by issuing debt or equity, Bloomberg said.
The hedge fund has a 7 percent stake in RadioShack.
The fund is also looking to refinance RadioShack's $250 million second-lien term loan, Bloomberg reported.
The struggling retailer reported its ninth straight quarterly loss in June and is burning through cash as it struggles to sustain its turnaround efforts, which have so far failed to bear fruit.
The company, whose sales have been falling since 2010, has been slashing prices to better compete with the likes of Best Buy Co Inc, Amazon.com Inc and Wal-Mart Stores Inc.
Standard General has also been helping American Apparel Inc's turnaround efforts. Its stake in the retailer recently rose to 44 percent after American Apparel founder Dov Charney gave his stake to the hedge fund as collateral for a loan.
David Glazek, a partner at Standard General, declined to comment. RadioShack was not immediately available for comment.
Up to Monday's close, the stock had fallen more than 72 percent this year.
(Reporting by Ramkumar Iyer in Bangalore; Editing by Simon Jennings)