Key vendors that supply bankrupt retailer
( KM) have resumed shipping goods, following a judge's approval of a $2 billion rescue package.
A number of key vendors, most notably its food supplier
, had halted shipments earlier this month as bankruptcy speculation mounted. Fleming is among those that have resumed shipments, after Kmart paid a $78 million bill.
Kmart, which filed for Chapter 11 bankruptcy protection last week, said Tuesday it had received approval from the bankruptcy judge for $2 billion of what is known as debtor-in-possession financing. This so-called DIP financing is secured by Kmart assets such as inventory and puts the bank lenders ahead of other creditors to get paid back. Kmart also said the court approved its plans to exit leases at about 350 underperforming stores, a move that will save the company about $250 million a year.
Kmart shares traded up 10 cents at $1.02.
Kmart has said it expects to emerge from bankruptcy in 2003, but in the meantime most of Wall Street will ignore it. Most analysts who followed the company have dropped coverage over the last week.
Meanwhile, Troy, Mich.-based Kmart faces allegations of accounting irregularities. On Jan. 25 Kmart said it was cooperating with the
Securities and Exchange
after receiving an anonymous letter that questioned the company's accounting.
While not as swift or as surprising as the fall of
, Kmart's collapse was seen as a long shot as recently as early this month when Prudential Securities analyst Wayne Hood published a report that suggested the company may be forced into bankruptcy later this year if it didn't reverse its sales trends. Things spiraled from there. The company reported disappointing holiday sales a few days later, and the ratings agencies followed with downgrades, which makes borrowing more expensive.
As the company scrambled for financing, suppliers tightened terms or halted shipments, making bankruptcy inevitable.