You are here
CHICAGO - The judge overseeing Kmart Corp.'s bankruptcy proceedings on Tuesday granted final approval for the retailer to close 316 stores and gave permission to proceed with a $2 billion exit financing package.
Kmart has reached agreement with landlords to restructure leases at eight stores and is negotiating over two others, so it is now seeking to close 316 stores as opposed to its original plan for 326. The original number included 60 supercenters, which sell groceries.
Kmart will soon begin selling more than $1.5 billion in inventory at the affected stores.
Upon completion of the sales, Kmart will have a store base of about 1,500, compared with about 2,200 at the time of its bankruptcy filing in January last year.
Kmart stands to receive more than $500 million in cash proceeds from the sales, which will cost the retailer about $300 million to conduct.
"Today we took a very, very important step to getting this company out of bankruptcy," Chief Executive Julian Day told reporters after the proceedings.
Kmart also got court approval to amend the terms of its original $2 billion debtor-in-possession loan to adjust for the store closings and related issues expected to arise as the retailer marches toward an April target to emerge from federal bankruptcy protection.
Kmart will use the liquidation sales to rid itself of products and product lines that it no longer intends to sell at its stores, Day said. The company will likely transfer some merchandise from stores to remain open in order to accomplish this task, he said.
Day also said there is a "groundswell of support" in the vendor community as the company moves forward.
Meanwhile, Fleming Cos. recently said it may stop supplying Kmart stores with groceries unless it can negotiate better terms with the bankrupt retailer.
Mark Hansen, chairman and chief executive of Fleming, said the contract was based on big increases in volume each year and an expansion of Kmart supercenters.
Without a volume increase or an expansion of Kmart supercenters, "the contract itself must be modified at minimum in order for Kmart to be in compliance with it," Hansen said last week in a conference call with analysts.