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K-Mart to file bankruptcy?

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  • K-Mart to file bankruptcy?

    Heard today that this is an option. They had a 'bad' Christmas season sales wise, and another possibility is to close down hundreds of stores. As with Ford I can't see them continuing in motorsports when they have these kinds of problems.

    As a long time supporter of racing I would hate to lose another one.

  • #2
    I work for a unit in my company that is a client of Kmart, and we are obviously watching closely and hoping for the best.


    • #3
      By Tom Barkley

      NEW YORK (Dow Jones)--With the board of directors of troubled Kmart Corp. (KM)
      scheduled to meet for a second day Tuesday, bond prices reflected a likelihood
      that the discount retailer would file for bankruptcy protection.
      Kmart bonds of various maturities are converging around the level of about 50
      cents on the dollar, which industry observers say is a sign that bondholders
      are valuing the debt based on how much they would expect to get back if the
      company's assets were split up in a bankruptcy proceeding.
      "Those are distressed securities, and trading in Kmart bonds definitely
      reflects the possibility of a bankruptcy filing," said David Maura,
      fixed-income strategist at Wachovia Securities in Charlotte, N.C.
      He declined to speculate on how much bondholders would likely get back on
      every dollar owed them, but he said the bonds should be trading a little below
      their expected recovery rates.
      Since opening the year around 80 cents on the dollar, Kmart bonds have been on
      a steady decline, pressured by downgrades and speculation of bankruptcy.
      Meanwhile, the shorter-term debt has accelerated its descent, trading more in
      line with longer-term securities.
      Because maturity doesn't matter in a bankruptcy - what's important is whose
      claim is higher up in the capital structure - all debt begins to trade around
      the same level when the market senses that a filing is close at hand.
      By early afternoon in New York Tuesday, the company's most liquid 9 3/8% notes
      due 2006 traded as low as 52 cents on the dollar, down another four or five
      cents on the day. Meanwhile, the 8 1/4% notes due 2022 were quoted around 49 to
      50 cents on the dollar.
      "There's still some differentiation, but it's getting pretty slim, which means
      the market is saying they're going to file," said a market participant.
      The market could be wrong, however. Market watchers say a bankruptcy filing
      isn't a given, since Kmart still has a number of options available to it.
      Kmart officials couldn't be reached for comment, but the company has described
      the board of directors meeting as routine.
      The company is said to be in negotiations with a group of bankers led by J.P.
      Morgan for a credit facility of between $2 billion and $2.5 billion, which
      would replace its current $1.5 billion in credit lines expiring at the end of
      the year. Any new credit facility would likely have to be backed by inventories
      or some other type of collateral, say industry observers.
      But some analysts think bankruptcy is a good option for Kmart.
      "I think a bankruptcy filing is an option with some merit and one they need to
      consider at this juncture," said Maura.
      In the short term, a new credit facility could give the company the necessary
      liquidity to continue to operate, even if suppliers pull back on trade credit,
      he said, adding that a restructuring would be a better long-term solution.
      "They're carrying way too many underperforming stores and a lot of bad
      leases," said Maura.
      Another market participant agreed, saying that Kmart could compete better
      against the more profitable Wal-Mart Stores Inc. (WMT) and Target Corp. (TGT)
      if it didn't have to make interest payments.

      -By Tom Barkley, Dow Jones Newswires; 201-938-4385; [email protected]

      (END) DOW JONES NEWS 01-15-02
      02:52 PM- - 02 52 PM EST 01-15-02


      • #4
        Is it safe to say this could be the biggest blue light special in history?


        • #5
          K-Mart's last year in CART was last year. This photo of Christian Fittipaldi testing should just about confirm that:

          If you look very closely, you'll notice the outline of the letter "K" under the red square on Christian's chin. (Last year's visor also said, "KMart" where the red bar is now on his helmet.)

          Dunno what their NASCAR commitment/involvement for 2002 is, but it is clear they're gone from CART. (And word is Eli Lily is taking their place)


          • #6
            K-Mart has been trying for at least eighteen months to lay off their sponsorship obligations in both CART and NASCAR. They tried renegotiating with the teams, and were somewhat successful, but ultimately were attempting to sell their sponsorships to some other company at a deeply discounted rate in an attempt to recover at least some of their costs.

            They were unsuccessful in selling their sponsorships, but did manage to reduce the value of sponsorship proposals from a number of secomd tier CART and NASCAR teams because of K-Marts distress pricing on their resale opportunity.

            Unlike the Target deal, which is primarily funded by manufacturer co-op money, the K-Mart deal was a straight advertising buy when it was initially done, making it a dead drain on expenses.


            • #7
              If you own any Kmart stock, Now would be a GREAT time to sell! Dont wait for a miracle, dont end up like those poor Enron shareholders, sell!!!


              • #8
                I've heard things are so bad at K-Mart that they've had to lay-off the blue light.


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