Kmart Corp. (Troy, Mich.) received bankruptcy court approval for parts of the reorganization plan it filed earlier this week, including its plan to close up to 318 stores.
Approval was also granted for $2 billion in exit financing from GE Commercial Finance, Fleet Retail Finance Inc. and Bank of America, N.A. This credit facility, which will be secured by inventory, would replace the company's current $2 billion debtor-in-possession facility.
The store closings were, however, reduced from the number announced earlier this month as a result of the completion of successful lease negotiations with landlords at nine stores: three SuperCenters in Carson, Calif., Indianapolis and Virginia Beach, Va.; and six regular Kmart stores in Flint, Mich., Mill Hall, Pa., Phoenixville, Pa., Abilene, Texas, Wenatchee, Wash., and Cayey, P.R. A store in Chesterfield Township, Mich., may also remain open, pending the outcome of ongoing negotiations for rent reductions.
The closing stores will continue to operate pending completion of inventory clearance sales, which are expected to begin Jan. 30, 2003. The store-closing process is expected to last approximately 10-12 weeks.
The bankrupt mass-merchandise discounter said the store closing program “is intended to enhance the company's financial and operating performance by allowing it to further reduce costs, improve cash flow, streamline distribution and focus its resources more efficiently. Kmart will continue to operate more than 1500 stores across the United States, the Caribbean and Guam.”
“We are pleased that key elements of our emergence plan — the $2 billion exit financing, the DIP amendment and the closing of underperforming stores — were approved by the bankruptcy court,” said president and ceo Julian Day. “While closing underperforming stores is critical to enhancing the company's financial and operating performance, we regret the negative impact this action will have on the affected associates, families, customers and communities. We are continuing to move forward on a timetable that would allow Kmart to complete its reorganization and emerge from Chapter 11 by April 30, 2003. We look forward to putting the costs and distractions of bankruptcy behind us so that we can focus on serving our customers in more than 1,500 stores in over 570 markets.”