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Kmart gets commitment for $2 billion exit financing facility
By Sara Rosenberg
New York, Jan. 14 - Kmart Corp. received a commitment for $2 billion in exit financing from GE Commercial Finance, Fleet Retail Finance Inc. and Bank of America. Furthermore, the company amended its debtor-in-possession facility to allow for store closings and adjust the cumulative EBITDA requirement to provide additional flexibility.
The exit financing facility would replace the company's current $2 billion DIP facility on the effective date of the reorganization plan.
Security for the loan will be the company's inventory.
Proceeds will be used to help fund the company's working capital needs, including borrowings for seasonal increases in inventory.
The bankruptcy court will hear motions on the amendment to the DIP and on payments to the exit lenders in connection with its $2 billion exit facility on Jan. 28.
"The developments we are announcing today mark an important milestone in Kmart's reorganization. When we filed our Chapter 11 cases last January, the Company anticipated that it would complete the actions required to be taken during its reorganization and emerge from Chapter 11 protection by the second quarter of 2003. Now that the Company has largely completed its Chapter 11 agenda, successfully obtained a commitment for exit financing and is in final negotiations with our stakeholders regarding the terms of what we believe should be a consensual Plan of Reorganization, we expect to meet - or even surpass - our original goal," said James B. Adamson, chairman and chief executive officer, in a news release.
Kmart plans to emerge from Chapter 11 by April 30, 2003. As of Jan. 1, 2003, the Troy, Mich. discount retailer had no borrowings outstanding and had utilized $345 million of its DIP credit facility for letters of credit. Its total DIP availability as of that date was $1.56 billion.
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