Kmart's $2 billion DIP facility launched on Valentine's Day raised $500 million by the end of last week with bankers saying the market is reacting with enthusiasm. The deal is priced at LIBOR plus 31/ 2% across the board with a 3/4 % commitment fee on the $1.8 billion revolver. There is also a $200 million letter of credit facility for the bankrupt retailer, which has set out ambitious plans for a quick re-emergence in 2003, according to a banker. The tenor on the DIP is 27 months, in which time, Kmart plans to invest in new technology, close unprofitable stores, and terminate the leases of about 350 stores.
The discount retailer has for some time struggled behind rivals like Wal-Mart, but it was not until a Prudential Securities analyst suggested Chapter 11, that bankers took notice and Kmart fell rapidly (LMW, 1/14). Lead arranger and administration agent on the deal is J.P. Morgan while co-lead arranger and documentation agent is Fleet Retail Finance. Co-syndication agents are Credit Suisse First Boston and General Electric Capital Corp. Calls to Steve Pagnani, Kmart spokesman, were not returned.