Shares of the company, which warned this month that it may have to file for bankruptcy if efforts to improve its balance sheet failed, rose as much as 44 percent to $1.14.
Standard General said it also raised its stake in RadioShack to 9.8 percent from 7.08 percent, becoming the company's largest shareholder.
The hedge fund said it was in talks with RadioShack to buy the company's loans and other commitments under its asset-backed credit facility.
Standard General and certain new investors would invest in the credit facility, and the investors have committed to provide draft financing to fund the transaction, the hedge fund said in a regulatory filing.
The filing did not name the investors.
The investment in the credit facility could also be the first step of a broader recapitalization that may include Standard General and the investors acquiring a stake in RadioShack, board nomination rights and changes to the company's structure, the hedge fund said.
RadioShack had $30.5 million in cash and $658.0 million in debt as of Aug. 2.
The company's efforts to cut costs have been hampered by creditors and vendors disagreeing to its restructuring plans.
RadioShack was forced to change its plans to close 1,100 stores this year to 200 stores a year, after lenders did not agree.
The retailer has been working on a financing deal with UBS AG and Standard General to refinance its $585 million asset-backed revolving credit line from General Electric Co's GE Capital, Bloomberg reported this month.
RadioShack's shares were up 28.22 percent at $1.02 in afternoon trading on the New York Stock Exchange.
(Reporting by Ramkumar Iyer in Bangalore; Editing by Maju Samuel and Sriraj Kalluvila)
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