Slashing for Growth: Bankrupt Kmart Cuts 37K Jobs, 326 Units

NEW YORK — The bill for Kmart Corp.’s second, and perhaps final, round of post-bankruptcy reductions is in: 326 stores, 37,000 jobs and $1.7...

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Kmart said that the net proceeds from the store closing sales is expected to be $500 million in cash flow to the company for 2003. Related restructuring charges are expected to aggregate to $1.7 billion, with the bulk to be recorded in the current fourth quarter of fiscal 2002.

According to company executives, there will be no more store closures between now and the anticipated Chapter 11 exit date of April 30.

The company expects to receive Chicago bankruptcy court approval on Jan. 28 to close the stores. Inventory clearance sales at the affected locations would begin almost immediately. The distribution center is slated for closure in March.

The discounter has already lined up $2 billion in exit financing from GE Commercial Finance, Fleet Retail Finance and Bank of America. The credit facility, secured by inventory, would replace the retailer’s current debtor-in-possession financing line on the effective date of the reorganization plan. Bankruptcy court approval is still needed for the plan of reorganization that it will file by Jan. 24.

Jim Rice, vice president for Sands Credit Services, observed: "A lot of people were still skeptical about Kmart coming out of Chapter 11. Now that we know Kmart has a firm commitment for exit financing, I think this gives the discounter more credence that it will exit bankruptcy."

Part of the court filing is an additional document known in bankruptcy terms as the disclosure statement, in which the retailer includes information such as its five-year business plan, one that Kmart said was approved by its board on Monday. Bankruptcy court approval of the statement on Feb. 25 will enable Kmart to begin the process of soliciting acceptances of its plan from its creditors. If delays — such as creditors negotiating over the terms of their distributions — and other glitches can be avoided, Kmart is hoping to be out of Chapter 11 by April 30, the end of its first quarter as well as that of most other large retailers.

Adamson said during the call Tuesday afternoon, "We do not want to remain in bankruptcy a day longer than necessary."

He added that the closures are "painful" because the actions affect thousands of loyal workers."
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