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Kmart files reorganization
Retailer details its plan to shake bankruptcy; creditor question remains.
January 24, 2003: 11:10 PM EST

NEW YORK (CNN/Money) - Kmart Friday filed its blueprint to emerge from what's been a year-long bankruptcy. But it was not immediately clear whether the retailer's reorganization plan, filed in Chicago, will pass muster with lenders.

Kmart said its plan of reorganization, filed with the federal bankruptcy court in Chicago, calls for two key creditors to invest at least $140 million in exchange for stock in the reorganized company.

The retailer plans to issue 500 million new shares and cancel its existing ones once the plan is approved. Creditors will receive the bulk of those shares while existing shareholders would receive at most 2.5 percent. Kmart has said the existing shares will likely be worthless, however.

Jack Butler, Kmart's lead attorney, declined to comment on whether all of the retailer's creditors had agreed to the terms, Reuters reported.

Ron Hutchison, Kmart's chief restructuring officer, earlier Friday said the retailer was prepared to submit the plan without a consensus from its lenders.

"If we can't file it on a consensual basis we intend to file anyway and continue to negotiate," he told Reuters. "It can always be amended."

Troy, Mich.-based Kmart listed $14.6 billion in assets when it filed for Chapter 11 bankruptcy protection on Jan. 22, 2002.

Facing crippling competition from Wal-Mart (WMT: Research, Estimates) and Target (TGT: Research, Estimates), the retailer last week said it is shutting 326 stores and cutting up to 35,000 as its tries to pare costs. This week, the company named a new CEO, Julian Day, replacing James Adamson, who will continue to serve as chairman.

Shares of Kmart, which were delisted from the New York Stock Exchange in December, closed at 13 cents Friday on Pink Sheets, an over-the-counter quotation service.  Top of page

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