KMART STOCK HITS A 52-WEEK LOW
Byline: Valerie Seckler
NEW YORK — The stock of Kmart Corp. hit a 52-week low Friday, losing 1/8 to close at 5 3/4, and according to market sources, it was driven down by the sale of a chunk of Kmart shares by former executives of Borders Group, which was spun off by Kmart Corp. in May 1995.
Robert Burton, director of investor relations at Kmart, speculated Friday that the stock’s slide reflected, in part, Standard & Poor’s downgrade of its long-term bonds to Double B from Triple B.
“There is some linkage between the stock and bonds,” said Burton. “When the bonds moved to high-yield status it probably forced some selling. There certainly are fewer dollars to support a Double B than a Triple B.”
He declined to comment on the Borders report.
Burton also said Kmart is in initial discussions with lenders over a new, multiple-year bank credit facility. “Those talks would heat up after the close of our deal with the real estate bondholders,” he added.
Kmart expects to close the deal, which would eliminate a ‘put’ option enabling holders of $548 million in real estate bonds to demand immediate payment, in late February, Burton said. Although the agreement with bondholders will eliminate the danger of a default, analysts have noted the price for Kmart will be steep.
Maturity on the real estate backed bonds has been accelerated to October 1997, and a premium will be paid to bondholders who agree to eliminate the put. Kmart said as a result of the agreement, it will pay about $98 million this year in fees and other financing costs, and about $60 million in additional interest expenses. — Fairchild News Service