This blogger fondly remembers the RadioShack cassette player/recorder her great-grandmother gave her in the late 1970s.  Cutting-edge technology at the time, the gadget allowed traveling musical entertainment and roving recording, a level of freedom that I have maintained through the years right down to my smartphone and Bluetooth headset.  So like many others, I greeted yesterday’s news of RadioShack’s widely anticipated Chapter 11 bankruptcy filing with no small amount of nostalgia.

As RadioShack’s own bankruptcy filing suggests, RadioShack arguably hasn’t achieved a memorable product launch since the mid-1980s. Simply put, it just isn’t the place to buy the newest thing anymore.  These troubles came to a head when the company made its after-hours filing in Delaware yesterday.

From a creditor/debtor lawyer’s perspective, the filing reminds us to keep a watchful eye on two pressing issues: the continued struggle by manufacturers and retailers to stay relevant in the new age of digital commerce, and the need to carefully negotiate and manage lending covenants.

RadioShack’s first day filings cite three years of very public declining revenues, the saturated mobility market, and its failure to receive lender consent to close stores as factors forcing its filing. The company proposes to close up to 2,100 of its underperforming stores, sell certain operational assets to an affiliate of its first-priority lender (or a higher bidder), and enter into a new alliance with Sprint to operate co-branded stores (read FedEx/Kinko’s).

RadioShack’s effort to save a small piece of its nearly one-hundred-year run might be too little, too late.  The Economist labeled the company a “Dead Brand Walking” almost a year ago, and every day seems offer more evidence of the challenges facing even formerly stalwart brands like Mattel, Sharp, and Best Buy.  It makes you think back to the Best Products, Borders, and Merry-Go-Rounds of the past, gone entirely, and the now online-only places we used to turn for the things we needed and wanted like Montgomery Ward, Blockbuster, and Linens ‘n Things.

While changing consumer preferences can’t simply be reversed, RadioShack’s filing recounts lengthy efforts to turn around its prospects by revamping its retail stores and closing under-performing locations, an effort reportedly thwarted by lack of consent from its lenders to close the number of stores necessary, as detailed by the Wall Street Journal.  RadioShack’s credit facilities prohibited it from closing more than 200 stores per year without such consent, clearly not a sufficient number given the more than 2,000 that will now close.  The lenders, secured in part by inventories in those stores, would not consent without additional concessions RadioShack reportedly could not or would not give.

This situation underlines that lending covenants can have consequences that aren’t necessarily obvious when you read the credit facility.  Take, for example, the retailer and the warehouse.  In order to reduce the costs associated with large retail spaces many retailers utilize just-in-time third-party warehouses.  Warehouses are entitled to a lien on the goods they store that can have priority over a lender’s claim to its inventory collateral.  If the retailer’s credit agreement prohibits priming liens, the lender can (and often does) insist that the warehouse waive its lien rights or that the retailer use some other warehouse, which can lead to increased costs, slower delivery, or loss of a preferential vendor relationship.

In a world where credit remains tight and the scabs of the recession have not fallen off, the lesson is clear: If you borrow money, no matter the lender, make sure you can live with the terms, or you may be regretting it sooner rather than later.