Kmart Corporation (NYSE: KM) announced today that it has filed a motion with the U.S. Bankruptcy Court for the Northern District of Illinois seeking to amend the Company's $2 billion debtor-in-possession ("DIP") credit facility.
The proposed amendment provides for an adjustment of the covenant pertaining to the Company's cumulative earnings before interest, taxes, depreciation, amortization and other charges (EBITDA) over specified periods to provide Kmart with additional flexibility and better reflect the Company's sales performance since its bankruptcy filing.
The amendment also seeks lender permission to increase the size of the DIP in an amount to be designated by the Company, not to exceed $500 million.
"In order to ensure that we are optimally positioned to succeed during the critical holiday season, we are asking our lenders to approve a potential increase in the DIP," said Al Koch, Chief Financial Officer of Kmart Corporation. "We believe that seeking this increase will provide additional comfort to our suppliers and the factor community, although Kmart does not project the need to use this additional liquidity. In fact, our latest projections show that during the peak seasonal inventory build we will have more than several hundred million dollars available in liquidity under our DIP facility as currently sized."
The Company anticipates having an amendment in place before the end of August with respect to the EBITDA covenant. In addition, the Company is optimistic that at the same time its lenders will authorize the increase in the DIP.
Kmart's liquidity continues to be strong, with approximately $400 million in available cash and more than $1.5 billion in available credit from the DIP facility.
Kmart Corporation is a mass merchandising company that serves America with more than 1,800 Kmart and Kmart SuperCenter retail outlets. Kmart in 2001 had sales of $36 billion.
Cautionary Statement Regarding Forward-Looking Information
Statements made by Kmart which address activities, events or developments that we expect or anticipate may occur in the future are forward-looking statements. Such forward-looking statements are and will be, as the case may be, subject to many risks and uncertainties, including, but not limited to, Kmart's having filed for bankruptcy and factors relating to Kmart's operations and the business environment in which Kmart operates, which may cause the actual results of Kmart to be materially different from any future results expressed or implied by such forward-looking statements. Factors that could cause actual results to differ materially from these forward-looking statements include those set forth in Kmart's Annual Report on Form 10-K for the fiscal year ended January 30, 2002 or in other filings made, from time to time, by Kmart with the Securities and Exchange Commission. The forward- looking statements speak only as of the date when made and Kmart does not undertake to update such statements.
Similarly, these and other factors, including the terms of any reorganization plan ultimately confirmed, can affect the value of our various pre-petition liabilities, common stock and/or other equity securities. No assurance can be given as to what values, if any, will be ascribed in the bankruptcy proceedings to each of these constituencies. A plan of reorganization could result in holders of Kmart common stock receiving no value for their interests. Because of such possibilities, the value of the common stock is highly speculative. Accordingly, we urge that appropriate caution be exercised with respect to existing and future investments in any of these liabilities and/or securities.
SOURCE: Kmart Corporation
CONTACT: Kmart Media Relations, +1-248-463-1021
Web site: http://www.kmart.com/