Kmart Edges Towards Chapter 11

22 January 2002

US discount chain Kmart is teetering on the brink of the biggest bankruptcy filing America’s retail industry has yet seen.

The group is reportedly considering a voluntary Chapter 11 filing as soon as today (Tuesday). However, on Monday night, say insiders, it was still seeking around $3 billion in new funds from a bank consortium headed by JP Morgan Chase.

The news follows declining same-store sales and cashflow, in response to which Kmart attempted to renegotiate its banking terms. This in turn eroded the confidence of suppliers and investors, sending its share price down two-thirds in the last few weeks to a 35-year nadir.

In addition, Kmart’s shelves are beginning to empty after its decision to cease payments to Fleming, which supplies food and groceries. Fleming has stopped its deliveries to the retailer and warned it would claim back inventories if its $78 million weekly bill is not settled.

News source: Financial Times