Kmart Corp. filed Tuesday for Chapter 11 bankruptcy protection, the biggest retail bankruptcy ever, ending weeks of speculation about the financial health of the No. 2 U.S. discount retailer, CNN reported.
In recent weeks, ratings agencies had downgraded Kmart’s credit, its stock plunged and the company was removed from Standard & Poor’s benchmark index of 500 leading stocks. The bankruptcy filing had been widely expected, but company officials had for several days declined to comment.
Kmart’s bankruptcy filing, with $17 billion in assets, is the biggest ever for a retailer, according to Bankruptcydata.com. Federated Department Stores Inc.
Kmart shares fell in early trading Tuesday.
Kmart, the No. 2 discount retailer behind Wal-Mart Stores Inc., said it had secured $2 billion in debtor financing and expected to emerge from bankruptcy in about a year, CNN reported. In Chapter 11 a company is protected from creditors while it reorganizes and tries to work out a plan to pay its debts.
“We are determined to complete our reorganization as quickly and smoothly as possible, while taking full advantage of this chance to make a fresh start and reposition Kmart for the future,” CEO Charles Conaway reportedly said in a statement.
Kmart said all of its 2,114 stores were open for business and that all credit cards, gift certificates, and store credits would be honored as usual, CNN reported. It also said its pension and savings plans are independent of the company and would be administered as usual.
But the Troy, Mich.-based company also said it would review the performance of each of its stores, with a goal to close unprofitable locations. The company said it hopes to cut about $350 million in annual expenses through reorganization and job cuts.
The news came a day after Fleming Companies Inc., Kmart’s largest food distributor, suspended shipments to Kmart after the retailer failed to make a weekly payment, CNN reported. Other vendors, including Scotts Co., have also suspended shipments.