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TROY, Mich. - A leaner Kmart Corp. emerged from Chapter 11 bankruptcy Tuesday with new leadership and less overhead. At the end of the 15-month case, the Troy, Mich.-based discount chain has 1,513 stores remaining and roughly 170,000 workers.
Kmart's Plan of Reorganization was approved by the U.S. Bankruptcy Court in Chicago April 22, paving the way for the company to complete new agreements and close on its $2 billion financing package.
Kmart completed an internal corporate restructuring in which it became an indirect subsidiary of a newly formed corporation, Kmart Holding Corporation. The company's publicly traded shares will be shares of common stock of Kmart Holding Corporation.
Kmart's new board of directors elected Edward S. Lampert, chairman and CEO of ESL Investments, to serve as chairman.
Kmart's new CEO and president Julian Day has said he will continue to focus on the basics: improving customer service, promoting exclusive brands and tailoring merchandise at local stores.
"We're not looking for any U-turns in strategy," Day said at the last court hearing. "We're looking to operate the company better."
Kmart plans to attract Hispanic shoppers through a new line of girls' clothing being developed with Thalia, a popular Latin singer.
The company still needs to fill a chief merchant position and find a chief financial officer to replace departing CFO Al Koch.
Kmart officials forecasted $25.5 billion in sales for fiscal 2003 and earnings of $19 million, compared with last year's $3.22 billion loss on sales of $30.76 billion. Same-store sales are expected to climb by 1.1 percent.
While in bankruptcy, Kmart reduced its debt by about $6 billion, slashed costs by closing 599 stores and one distribution center, laid off 60,000 workers and cut corporate expenses by dumping car leases and selling three company jets.
After completing payments related to Kmart's emergence from bankruptcy, the company expects to have approximately $750 million in cash.
Although Kmart has emerged from Chapter 11 bankruptcy, the actual court case will continue until all the distributions are made and claims resolved, Kmart's lead bankruptcy attorney Jack Butler said. Monthly court hearings will continue to address these matters. Eastman Kodak Co. had filed an appeal to Kmart's Plan of Reorganization Friday with the U.S. District Court in Chicago.
Kmart also will pursue legal claims against former executives, including ex-CEO Charles Conaway. The company has created a Creditors' Litigation Trust to file lawsuits against former executives, alleging breach of fiduciary, loyalty and candor, gross negligence and other causes of action. Any recoveries will be divvied among creditors, landlords with lease rejection claims and shareholders.
Kmart's former management team is under scrutiny by the U.S. Attorney's Office, the House Energy and Commerce committee and the Securities and Exchange Commission. Two former executives were indicted by a federal grand jury in Detroit in February and charged with securities fraud.