| |
IMPORTANT NOTICE |
| Kmart Corporation and 37 of its U.S. subsidiaries and affiliates emerged from the Chapter 11 reorganization process on May 6, 2003. The Company and the related entities had filed voluntary petitions for reorganization under Chapter 11 of the U.S. Bankruptcy Code on January 22, 2002. The Company’s First Amended Joint Plan of Reorganization, as modified (the “Plan of Reorganization”), was confirmed by the United States Bankruptcy Court for the Northern District of Illinois as per an order entered on April 23, 2003. The Plan of Reorganization became effective on May 6, 2003. |
| The statements made by Kmart on this web site are qualified in their entirety by, and should be read in conjunction with, the more detailed discussions and information in the Plan of Reorganization and Disclosure Statement. |
| Statements made by Kmart which address activities, events or developments that we expect or anticipate may occur in the future, including certain of the information contained in the Plan of Reorganization and Disclosure Statement, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that reflect the Company's current views with respect to current and future events and financial performance. 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 Kmart's ability to operate pursuant to its exit financing facility; the ability of the Company to obtain and maintain normal terms with its vendors; the ability of Kmart to attract and retain customers; and those set forth in Kmart's Annual Report on Form 10-K for the fiscal year ended January 29, 2003, or in other filings made, from time to time, by Kmart with the Securities and Exchange Commission (the "Company Filings"). The forward-looking statements speak only as of the date when made and Kmart does not undertake to update such statements. |
Is there still a trading market for Kmart Corporation common stock?
No. In accordance with the Plan of Reorganization, when the Company emerged from Chapter 11 on May 6, 2003, the previously issued common stock was cancelled and, as such, trading has ceased.
What distribution are previous equity holders receiving under the Plan of Reorganization?
A Creditors’ Trust was established for the benefit of the Company’s creditors to pursue all causes of action arising out of the Company's Accounting and Stewardship Investigations. Except possibly for a minor part of the proceeds, if any, of the Creditors’ Trust, holders of Kmart Corporation’s former common stock are not going to receive any distributions following emergence and their equity interests have been cancelled.
What is the Creditors' Trust?
It is a trust that was established upon Kmart’s emergence from Chapter 11 to pursue and resolve any legal claims that may arise out of the Company’s Stewardship and Accounting Investigations. The Company, after consulting with the Statutory Committees established in connection with the Chapter 11 proceedings, had determined that a creditors’ litigation trust – the Creditors’ Trust – was the right vehicle to address these matters.
As part of the Plan of Reorganization, a trustee of the Trust was charged with the responsibility of determining which claims to pursue and litigating those claims. The Company will share with the trustees all the evidence gathered during the investigation that is relevant to such claims.
Why aren’t the holders of Kmart’s former common stock receiving any distribution following the Company’s emergence from the Chapter 11 reorganization process except possibly for a minor part of the proceeds, if any, of the Creditors’ Trust?
Under U.S. federal bankruptcy law, holders of common stock of a company in Chapter 11 are the lowest in priority in bankruptcy and are after secured and general unsecured creditors in terms of their ability to receive a recovery on their claim. In Kmart’s case, there wasn’t enough money to distribute to the other creditors to allow for shareholders to be eligible to receive a recovery -- other than the potential recovery from the proposed Creditors’ Trust.
Will holders of Kmart’s former common stock receive a certificate reflecting their interest in, or right to receive proceeds, if any, from the Creditors’ Trust?
No. In accordance with the terms of the Creditors’ Trust, no certificates are to be issued with respect to these interests in, or rights to receive proceeds, if any, generated by, the Creditors’ Trust.
Can holders of Kmart’s former common stock sell their interests in, or rights to receive proceeds, if any, from the Creditors’ Trust?
No. Such interests are not transferable except in very limited circumstances such as upon a holder’s death.
When will holders of Kmart’s former common stock receive any proceeds from the Creditors’ Trust?
That will depend on actions taken by the Creditors’ Trust and its ability to obtain recoveries under any litigation that the Trust may choose to pursue. The Trust has a term of three years. As previously noted, the Company can provide no assurance as to what recoveries, if any, will be distributed by the Creditors’ Trust to the former holders of Kmart Corporation’s common stock.
If I was a shareholder of Kmart Corporation’s common stock at the time the shares were cancelled, is there any action I should take to register my shares or file a claim with the Creditors’ Trust?
No. Kmart’s Transfer Agent was instructed to maintain a list of all stockholders of record on the date the shares were cancelled (May 6, 2003). If your shares were held in a brokerage account, your broker should maintain records of such ownership.
What are the tax implications of owning cancelled shares? Will the Company issue a letter confirming that the stock has been cancelled?
Holders of the cancelled common stock should contact their financial advisor for more information about the tax implications. Kmart will not be issuing letters confirming that the stock has been cancelled.
What did holders of prepetition bank debt receive under the Plan of Reorganization? What did other creditors receive?
Other than ESL Investments, which is one of our Plan Investors, holders of prepetition debt received 40 cents, in cash, for each dollar of the debt they held. Holders of prepetition notes and debentures issued by Kmart and trade creditors, service providers and landlords with lease rejection claims are sharing in the stock of the reorganized Kmart, other than the shares allotted to the Plan Investors. Information about distributions to other prepetition creditors is provided in the Disclosure Statement.
What distribution did holders of Kmart Corporation’s trust preferred securities receive under the Plan of Reorganization?
When Kmart emerged from Chapter 11 on May 6, 2003, the trust preferred securities were cancelled. In accordance with the Plan of Reorganization, no distribution will be made to holders of trust preferred securities. However, holders of trust preferred securities at the time Kmart emerged from Chapter 11 will be entitled to participate in the proceeds, if any, distributed by the Creditors’ Trust, as more fully described in the Plan of Reorganization and Disclosure Statement.
What is Kmart Holding Corporation?
As part of the Plan of Reorganization, Kmart Corporation has become a subsidiary of a new holding company known as Kmart Holding Corporation. It is the stock of this new holding company that is being issued and is currently publicly traded.
When will the new common stock of Kmart Holding Corporation be issued?
The new stock is being issued in accordance with the terms of our Plan of Reorganization in satisfaction of certain prepetition obligations (i.e., obligations that existed before we filed for protection under Chapter 11), as well as to our Plan Investors pursuant to an investment agreement which we had entered into with them at the time we first filed our Plan of Reorganization with the Court.
The timing for the receipt of shares by the holders of our prepetition liabilities will depend on the type of liability, as provided in our Plan of Reorganization. On May 6th, we issued shares to the Plan Investors and holders of our prepetition notes, which are referred to as Class 4 claims in the Plan.
Holders of trade vendor/lease rejection claims, which are referred to as Class 5 claims under the Plan, are also entitled to receive shares. However, these will be distributed over time commencing no later than June 30, 2003, as their claims are administered in accordance with the Plan.
Where will the new common stock be listed? On what exchange?
The new common stock of Kmart Holding Corporation began trading on the NASDAQ National Market System on June 10, 2003, under the symbol: KMRT.
When will stock be available to individual investors?
The Company is not offering any shares for public sale. Any individuals interested in the new stock will need to look to the public marketplace.
Can shareholders of the former common stock of Kmart Corporation convert their shares into the new common stock of Kmart Holding Corporation?
No. The previous common stock has been cancelled. The new common stock is being distributed to certain creditors of Kmart in satisfaction of their claims – in accordance with the Plan of Reorganization – and was issued to our Plan Investors.
How can I tell if I own shares of the cancelled common stock or the new common stock?
The cancelled common stock was issued by Kmart Corporation. The new common stock is being issued by the newly created holding company, Kmart Holding Corporation.
Who are the members of the new Board of Directors of Kmart Holding Corporation?
In addition to Kmart President and Chief Executive Officer Julian C. Day, the new Board of Directors consists of the following individuals: Edward S. Lampert, Chairman, E. David Coolidge III, William C. Crowley, William Foss, Steven T. Mnuchin, Anne Reese, Brandon Stranzl and Thomas J. Tisch.
Has the new Board of Directors taken office?
Yes. The new Board of Directors was constituted at the time Kmart emerged from Chapter 11 on May 6, 2003.
What is Kmart’s exit financing?
The $2 billion exit financing is a credit facility that replaced the Company’s $2 billion debtor-in-possession ("DIP") credit line when the company emerged from Chapter 11 on May 6, 2003. The new financing is available to Kmart to help meet its ongoing working capital needs, including borrowings for seasonal increases in inventory.
What is Kmart’s strategy now that it has emerged from Chapter 11?
Kmart has emerged from Chapter 11 as a new and vital enterprise focused on delivering value to customers and stakeholders alike. Our focus going forward will be on continuing to revitalize our business by driving profitable sales, identifying opportunities to further improve efficiency and reduce costs, and enhancing asset productivity. Our associates are facing the future with new energy and enthusiasm – and a renewed commitment to providing our customers compelling promotional values, great private brands and excellent service.
Why are you confident that this strategy will work?
With the financial and legal part of our reorganization behind us, we now have the time and resources to focus with greater intensity on revitalizing the business. Restoring Kmart’s reputation as a leading discount retailer is a top priority of our new leadership, and is supported by a new organizational structure that will help us run the business as efficiently and cost effectively as possible. On top of that, Kmart has tens of thousands of energetic and committed associates across the company. Our team has a sharp focus on the retailing fundamentals – particularly on driving profitable sales growth so that we can improve our market position.
|
|
