NEW YORK — Kmart Corp.’s stock tumbled nearly 17 percent Friday in extremely heavy trading amid continuing concern over the discounter’s financial health.
The discounter saw its stock tumble 1 1/4 to 6 1/4 on the New York Stock Exchange Friday, as 24.2 million shares changed hands.
In a statement Friday, Kmart, based in Troy, Mich., said it knew “of no reason for the significant trading activity in its stock.”
According to the statement, the company’s existing credit availability has been “more than sufficient” to meet its needs through the holiday season and it is generally current with trade vendors.
Investors apparently became more pessimistic about Kmart’s prospects after the retailer outlined some negative developments in a quarterly filing with the Securities & Exchange Commission. Among the disappointments:
* The company, since the end of October, has seen a general tightening of credit conditions.
* Kmart had drawn $2.4 billion in short-term borrowing as of Dec. 8. Earlier in the year, Kmart said peak borrowing would be $2.1 billion. The report does not address whether the company has made any progress in its negotiations with holders of $681 million in “putable” debt. However, in Friday’s statement, the company added that it is “still in active negotiations with the holders of [its] real estate debt and that it continues to make progress.”
According to the statement, “Our intention over the next several quarters is to put the putable bond issue behind us, and following that, to put into place a financial structure for this company that is stable and gives a sense of comfort and confidence to our vendors and suppliers.”
The holders of those bonds have the right to “put” the bonds, or make Kmart redeem them at a predetermined price, if the bonds fall below investment grade status. Standard & Poor’s has rated Kmart debt as investment grade, but just two levels above junk-bond status, or noninvestment grade. The ratings agency said previously it would downgrade Kmart debt at least one level sometime after Christmas. — Fairchild News Service

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