Kmart looking at ways to cut cost of $2 billion credit facility

By Peter Heap

New York, Aug. 28 - Kmart Holding Corp. said it is looking at "various alternatives" to reduce the cost of its $2 billion exit financing credit facility.

The Troy, Mich. retailer had availability of $1.5 billion as of July 30. In addition it had $1.2 billion of cash and equivalents.

"In light of its favorable liquidity position, the company is exploring various alternatives to reduce the cost of its exit financing facility," Kmart said in its earnings announcement late Thursday.

For the second quarter Kmart reported a net loss of $5 million. Income before interest, reorganization items, income taxes and discontinued operations was $8 million.

"We are pleased with the progress we continue to make in our business. We are focused on profitable sales, reducing SG&A and enhancing the productivity of our assets. As a result, our liquidity position remains strong," said Julian C. Day, Kmart's president and chief executive officer, in a news release.

Kmart obtained its exit financing facility as part of its emergence from Chapter 11.

The $2 billion revolver, which includes an $800 million letter of credit sub-facility, carries interest at Libor plus 350 basis points - although after one year this rate may be reduced if the company reaches EBITDA targets. There is a 75 basis points fee on the unutilized portion.

The facility matures in 2006 and is via General Electric Capital Corp., Fleet Retail Finance Inc. and Bank of America, NA.

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