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CHICAGO -- Bankrupt retailer Kmart Corp. and its former grocery supplier, Fleming Cos. have reached a settlement over money Fleming says it is owed by Kmart, the Detroit Free Press reported on Friday.
Under the proposed settlement, Kmart owes Fleming $385 million for profits it would have earned supplying the retailer with groceries if Kmart had not terminated a supply contract earlier this year, the newspaper said, citing a bankruptcy court filing.
That is less than the $1.53 billion Fleming has sought, but more than Kmart said it deserved, the newspaper said.
Under a reorganization plan filed by Kmart in January, suppliers will be awarded about 10 percent of their pre-bankruptcy claims in the form of stock in the reorganized Kmart, implying Fleming would get about $38.5 million in stock.
In the filing, Kmart said ESL Investments Inc., Connecticut financier Edward Lampert's company, has agreed to buy Fleming's stock for an amount less than its projected value, the newspaper said. ESL and Third Avenue Trust would invest an additional $293 million in the retailer in exchange for slightly more than 50 percent of its stock and four seats on Kmart's board, the newspaper said.
Fleming will also get $15 million from Kmart for goods and services supplied, about half of what it sought, the newspaper said.
The agreement is subject to approval by the bankruptcy court judge.