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Mix-Ansicht- Ob die Banken davon einen Cent wiedersehen? (JPM natuerlich lead!) - XERXES, 07.03.2002, 08:25
Ob die Banken davon einen Cent wiedersehen? (JPM natuerlich lead!)
Kmart Wins Judge's Permission to Tap $2 Billion Loan (Update3)
By Jeff St.Onge
Chicago, March 6 (Bloomberg) -- Kmart Corp. won a federal bankruptcy judge's permission to draw on a $2 billion bank loan, the biggest ever to a company reorganizing under Chapter 11 protection from creditors.
U.S. Bankruptcy Judge Susan Pierson Sonderby at a hearing in Chicago approved Kmart's request to use the money to help pay its more than 250,000 workers and hundreds of suppliers while trying to emerge from bankruptcy.
``The size of the loan is obviously extraordinary,'' said San Francisco attorney Patrick Murphy, a bankruptcy financing expert. ``Presumably Kmart has the objective of providing cash flow to the company, enticing suppliers to ship goods and projecting an aura of stability.''
Kmart, the largest retailer ever to file for Chapter 11, has struggled to compete with rivals Wal-Mart Stores Inc. and Target Corp. The economic slowdown last year and disappointing 2001 holiday sales helped drive the Troy, Michigan-based company to file for bankruptcy in January.
The third-largest U.S. discount retailer, with 2,100 stores, also won Sonderby's permission to begin closing unprofitable locations and liquidating inventory at the sites. Analysts say the company will close hundreds of stores as part of its bankruptcy recovery plan. About $750 million of merchandise will be liquidated at the stores, Jack Butler, Kmart's bankruptcy attorney, told the judge.
Banks led by J.P. Morgan Chase & Co. and Fleet Securities Inc. have agreed to provide a $2 billion line of credit.
Kmart shares rose 1 cent to $1.10.
Store Closings
Kmart hasn't specified which stores it will close in an initial round to begin in coming weeks. Butler told Sonderby today it would file a confidential list with the court by next Monday.
``We have a lot of employees who are on pins and needles whether they are implicated,'' in the store closings, said Butler, of the Skadden, Arps, Slate, Meagher & Flom law firm.
Sonderby approved some procedures for shutting the stores and for hiring a liquidator to sell merchandise and other property. Kmart will conduct an auction next week to select the ``store- closing agent'' to liquidate a total of $750 million of inventory. A further hearing was scheduled for March 20.
Abacus Advisory & Consulting Corp. is advising Kmart on the store closings, which will last for several weeks and end sometime this summer, according to court papers.
Kmart has said it plans to come out of bankruptcy in July 2003.
Bonuses
Kmart won approval to pay around 9,950 mid-level executives, store managers and pharmacists a total of as much as $150 million in bonuses to coax them to stay with the company through the bankruptcy.
A hearing to consider approving bonuses for Kmart Chief Executive Officer Chuck Conaway and 45 of the company's executive vice presidents and senior vice presidents was delayed for two weeks. Kmart's creditors are reviewing the proposal, court papers show.
Kmart filed a revised bonus program today, company spokesman Michael Freitag said. The document wasn't immediately available.
The company had asked for approval of salary and bonuses that could give Conaway almost $20 million over two years.
Under an agreement struck in January, he'd be paid at least $1.5 million a year and be eligible for annual bonuses of $1.87 million, or 125 percent of his annual pay. He'd also get a $2.25 million ``emergence'' bonus if he stays through the Chapter 11 case.
The agreement also calls for Kmart to forgive a $5 million loan to Conaway and give him a $6.5 million ``retention payment'' if he stays until July 31, 2003, or if he is fired without cause.
The company would reimburse Conaway for any taxes he pays as a result of the $5 million loan being forgiven, court papers show. Conway, 41, also will receive Kmart stock options.
In 2000, Conaway received $8 million in bonuses, $1.4 million in salary and stock options valued at $15.2 million. He was hired that May.
Executive bonus plans ``are usually the most sensitive and emotional issue that come up in these cases,'' Scott Hazan, a New York attorney representing Kmart's creditors' committee, told Sonderby.
While the creditors' panel supported the bonuses approved today, ``there's some question whether it went far enough at the store level,'' Hazan said.
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