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WASHINGTON - Kmart Corp. said the $1.4 billion claim filed against it by Fleming Cos. in Kmart's bankruptcy case was "artificially inflated" and that it didn't match with the statements of Fleming's own executives, Dow Jones newswires reports.
Fleming filed the prepetition claim earlier this month, seeking payment for profits it said would have occurred under a canceled contract with Kmart, including reimbursement for payments Fleming continues to make on behalf of Kmart to third parties. Fleming has said that it is owed the $1.4 billion amount, with $989 million of the amount related to minimum purchase requirements under the pact.
Kmart said in its objection to Fleming's claim, obtained by Dow Jones Newswires Monday, that there were no minimum purchase requirements under the agreement and that Fleming's claim would amount to less than $190 million.
Fleming supplied Kmart with virtually all the "food, consumables and core pantry products" the retailer sold, until the U.S. Bankruptcy Court in Chicago allowed Kmart to reject the agreement in February, the objection said.
Kmart also said in its objection that public statements Fleming officials made during conference calls with investors and analysts about the impact the loss of its contract with Kmart would have on the business aren't even close to the claim it made against the company.
Fleming executives have said in the calls that losing Kmart as a customer would have an impact of 38 cents to 48 cents a share on Fleming annually, the objection said. If multiplied by the number of Fleming shares outstanding, the loss would be $20.5 million to $25.9 million annually, with the agreement not scheduled to end until at least 2007.
Kmart and Fleming issued a joint press release on the day the agreement was rejected, saying that ending the pact was "the right solution," the objection said.
"There is no rational explanation for why Fleming believes its damages could be so high when its earnings in previous years were so low even though Kmart made substantial purchases during such time," the objection said.
Kmart also said Fleming failed to submit proper documentation to support its claim, which has made it difficult for Kmart to dispute the claims with specific documentation.