News

Chapter 11 looms for Kmart

February 17, 2002

Kmart Corp. (NASDAQ:KM), which a year ago was rolling out an ambitious kiosk project, filed for Chapter 11 bankruptcy on Jan. 22 as the discount retailer faced mounting pressure from creditors and concerns over its future viability.

Citing sources familiar with situation, the Wall Street Journal reported that Kmart's board authorized the Chapter 11 filing on Jan. 21. The company, which operates about 2,100 stores, is saddled with roughly $4.7 billion in debt and has not recovered from a disappointing holiday shopping season.

According to CBS.Marketwatch.com, the company plans to keep its stores open during Chapter 11 proceedings through a $2 billion senior secured financing note.

Kmart's problems intensified on Jan. 21 when Fleming Cos., the company's lone grocery supplier, suspended shipments after Kmart failed to make a regular weekly payment.

In January of 2001, Kmart installed 3,500 Web-based kiosks in its stores. Using the kiosks, shoppers could purchase products online through Bluelight.com, a Web site created - but independent from - the company. But Bluelight was not immune to the struggles of the Internet sector and laid off the bulk of its employees. Kmart bought the company out last summer (See story: Lights out at Bluelight.com).