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TROY, Mich. -- Attention Kmart creditors, the Blue Light has dimmed.
Kmart Corp., the nation's second largest mass retailer, filed for bankruptcy protection yesterday after trying unsuccessfully to dig its way out of mounting debt.
The retailer, which last week shook up its executive suite and has been meeting around the clock with lenders to refinance its debt, said it has secured $2 billion in debtor-in-possession financing and that its 2,100 stores would continue in operation during the reorganization.
The filing represents the largest retail bankruptcy proceeding in history, eclipsing the previous record filing by Federated Department Stores and its sister Allied Stores division in 1990. It is the largest ever bankruptcy filing by a full-line discount chain.
"We are committed and determined to complete our reorganization as quickly and as smoothly as possible, while taking full advantage of this chance to make a fresh start and reposition Kmart for the future," said Chuck Conaway, the company's CEO, who was stripped of his chairman title last week. "We deeply regret any adverse effect today's action will have on our associates, vendors and business partners. But after considering a wide range of alternatives, it became clear that this course of action was the only way to truly resolve the company's most challenging problems.
Despite rampant rumors for several weeks, Kmart tried to avoid bankruptcy right to the very end. However, the news that Fleming Cos., Kmart's major food distributor, had decided Monday to halt shipments after the retailer failed to pay a $78 million bill, was the final nail in the coffin.
Fleming was the latest of many vendors that stopping shipping goods to the retailer amid the bankruptcy speculation that was touched off by Kmart's poor holiday sales results, a series of credit downgrades of Kmart's debt ratings, and a sudden drain on the company's cash flow. The latest credit downgrade occurred Monday
Prior to the filing, Scotts Co, a maker of lawn and garden products, also said it stopped shipments to Kmart and several overseas vendors of Kmart apparel lines said they were delaying shipments to the retailer. A check of stores by CSNews staff in the past few days found numerous out-of-stocks throughout many departments.