Waiting for Kmart on 5th

TROY, MI — Kmart's home textiles suppliers were stuck in wait-and-see mode Friday as the bankrupt retailer haggled with creditors over its plan of reorganization, vowing to file without an agreement if necessary and to keep on negotiating.

Kmart had said all week it would file its plan on Friday, Jan. 24. And throughout the day, the silence on the subject of Kmart was deafening as the vendor community, Wall Street and rival retailers waited for the shoe to drop.

Factors and financial investors also spent the day in suspended animation, some eyeing Kmart's bond trades for some indication of how the settlement might shake out.

Kmart's upside to receivables was "so tough to tell," said Ivan Abrams, president of New York-based factoring firm Abrams & Co. Abrams said many of his clients, a roster that includes home products suppliers, cycled out before Kmart filed for Chapter 11 protection in January 2002.

"Kmart wasn't the best at holiday time, and anyone distributing to them would be worried about the stability," Abrams added.

Former Kmart investor Yale Capital Croup, New York, will wait until the retailer comes out of bankruptcy before deciding whether to do business with the company again, but even then will probably proceed on a transaction-by-transaction basis, owner Lewis Faber said.

"Kmart has a difficult road ahead, but they're a name to be reckoned with in the marketplace. They've managed to get merchandise through these difficult times — the shelves are not empty," he said.

For many of the retailer's suppliers, Kmart's post-11 health could have a critical impact on their own. With over $1 billion in home textiles sales last year, Kmart remains one of the industry's largest retailers, although when the receipts for 2002 are finally tallied, it may loose its fourth place standing among the industry's Top 50 retailers. But even as it pares another 326 stores from its base, the supplier community needs its remaining 1,500 stores to return to profitability as quickly as possible.

"We're factored, so it's all in the hands of the factor," said Charles D. Owen III, president, Charles D. Owen Mfg. "And they tell us that they're waiting for the plan to come out. They're a major customer, and we want to ship them, but we're all waiting for the plan."

Georgia Tufters, also a factored Kmart supplier, was remaining "hopeful" amid the uncertainly last week, said Pasquale Romano, vp national sales. The company is looking forward to Kmart's plan to exit bankruptcy in April, he said, and "we're hoping everything will be back to normal soon after that."

One of the main lingering questions was what kind of payout Kmart would offer its vendors — cash or stock. Indeed, much of the wrangling between Kmart and its major creditors revolved around the size of the equity they would receive in the company.

"I'm not sure there is a good definition of 'fair,'" said Perfect Fit president and ceo Lou Morris, whose company is not among the major creditors group. "The main event is getting the company out of 11 so that it can operate in a profitable way."