Kmart's bank debt continues to lag after the holiday season produced weaker than expected results for the retail sector. Levels on the company's three-year, pre-petition revolver continue to be quoted in the 25-30 context, according to dealers. The $1.1 billion loan is led by J.P. Morgan. "The retail season shaped up to be poorer than expected," said one trader, noting that buyers for the paper have backed off. Kmart reported a loss of $383 million, or 76 cents per share, for its latest quarter.
Kmart's management expects the company to emerge from bankruptcy in the summer of 2003, but some investors still fear that the company will not be able to continue as a going concern. A Kmart spokeswoman dismissed those concerns and said a plan of reorganization is due by Feb. 24. One market player said the bank debt is currently quoted lower than its recovery value if the company is able to continue as a going concern, but higher than the recovery value expected under a liquidation scenario. Albert Koch, Kmart cfo, could not be reached by press time.