Kmart Loans Draw Blue Spotlight Special

Observers were scratching their heads once again Wednesday as they examined the latest twists in the Kmart(KM Quote) story.

Most perplexing to many analysts and investors is how the bankrupt discount retailer chose to dole out about $30 million in loans to top executives in the months before it filed for Chapter 11 in January. But also drawing blank stares is the continued appreciation of the company's stock, which has more than doubled since Kmart sought creditor protection -- despite the fact that shareholders typically retain no value in bankruptcy reorganizations.

"In the end, I'm not sure what equity holders will get from Kmart," says Jeff Stinson, an analyst at Midwest Research who is one of the few Wall Streeters to cover Kmart. Stinson, who expresses surprise that the stock remains capitalized at $763 million even as the company closes stores and otherwise prepares for a sweeping makeover, is neutral on the stock, and his firm doesn't have an investment banking business.

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