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CHICAGO - A bankruptcy court approved $2 billion Wednesday in new financing for Kmart Corp., plus up to $150 million in bonuses to encourage key employees to stay with the company, The Associated Press reports.
Judge Susan Pierson Sonderby rejected an effort to sidetrack the bonus program by the Union of Needle Trades, Industrial and Textile Workers, a Manhattan-based group that represents 3,000 Kmart distribution-center employees.
The $150 million is the ceiling for bonuses Kmart can pay to vice presidents, middle managers and pharmacists the company considers essential, the AP reports.
Union attorney William Widmer argued that the company does not need more than 9,000 employees to ensure Kmart's longevity. He said those likely to get the money were to blame for the company's woes.
Kmart bankruptcy attorney John Butler said the employees were highly sought by other companies. He said he suspected that employees who objected were disgruntled because the money wouldn't go to them.
In other related news, the AP reports that some Kmart Corp. stockholders have filed a class-action lawsuit against chief executive Chuck Conaway on behalf of people who bought Kmart shares before the company's bankruptcy filing.
The suit, filed Wednesday by Rabin & Peckel LLP in U.S. District Court in Detroit, names Conaway rather than Kmart since the retailer is in Chapter 11 bankruptcy protection. It was filed on behalf of people and companies that bought Kmart common stock between May 17 and Jan. 22, the day the discount retailer filed for Chapter 11 bankruptcy protection.
Wednesday's suit follows a similar one filed Feb. 22 by Cauley Geller Bowman & Coates LLP. Ferry said that usually when one class-action suit is filed, others follow.