A group of investors led by RadioShack's largest shareholder, Standard General, have replaced a $585 million debt facility that had been provided to the electronics retailer by GE Capital in a move that will allow the struggling company to tap more funds, sources familiar with the matter said.
The deal arranged by the hedge fund, which holds a 9.8 percent stake in RadioShack,has less restrictive terms than the GE facility and will help ease the company's cash problems ahead of the holiday shopping season.
Read MoreRadioShack hoping for a Christmas miracle
The facility will boost RadioShack's liquidity by at least $120 million, the sources said.
RadioShack said last month that it may need to file for bankruptcy protection if its cash situation worsened.
The company said it was also exploring other options, including a sale or an investment, and liquidation as the last resort.
RadioShack shares were halted ahead of an official announcement, expected later on Friday.
Bloomberg reported the deal earlier in the day.
Read MoreRetail turnover rates on the rise
Standard General said last week it was in talks to improve RadioShack's cash position.
The hedge fund also said it had raised its stake in RadioShack to 9.8 percent from 7.08 percent to become the company's largest shareholder.
RadioShack declined to comment on Friday.