Associated Press
DETROIT — Shares of Kmart Corp. plunged close to 14 percent Tuesday, fueled by concerns over a possible bankruptcy filing amid a series of downgrades by analysts and investment rating agencies.
Shares were down 39 cents to $2.45 each on the New York Stock Exchange.
Kmart spokesman Jack Ferry confirmed that the company’s board of directors was holding a previously scheduled meeting Tuesday and also held committee meetings Monday.
Ferry declined to say what the board was discussing, but sources close to the company said board members were discussing the retailer’s financial choices, including a bankruptcy filing.
"I think they are looking at their liquidity options, and their options of closing stores," said Marie Driscoll, an analyst at August Research, an independent investment firm.
Driscoll and other analysts expect that Kmart, the nation’s third largest discounter behind Wal-Mart Stores Inc. and Target Corp., could close as many as 200 to 400 of its approximately 2,100 stores. A Chapter 11 filing for bankruptcy protection would make it less costly to extricate Kmart from the leases, they said.
Richard Church, an analyst at Salomon Smith Barney, said Tuesday that it was lowering its risk rating on the Troy-based retailer from "high" to "speculative," given the uncertainties surrounding the company’s situation and outlook.
"While … we believe that Kmart has many options it can explore in order to meet its liquidity over the coming 12 to 18 months, other less quantifiable factors such as lack of vendor support have elevated Kmart’s risk profile considerably more than we thought to be the case as recently as yesterday," Church wrote in a research report.
Also on Tuesday, Standard &Poor’s, one of the nation’s largest debt rating agencies, lowered its credit rating on 14 Kmart-related credit lease transactions and placed them on CreditWatch with negative implications.
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