Jess, your question is a fair one and the answer is one of the miracles of politics and finance. Under the bankruptcy agreement, the government would protect Kmart from it's creditors while it restructures it's finances. To do that, it had to close some 500 stores, lay off thousands of workers and NOT HAVE TO SHOW A PROFIT while they raised cash. They then floated a high interest bond issue, raising millions of dollars and are now in the process of paying off the bonds. Here's the scary part....Kmart had bought back almost all of it's own stock and became a "Holding" company. Then, they reverse spilt all stock, made 10 shares into one, which increased in value with all the cash they raised, enough for it to be of the same relative value of Sears, and they did a one for one swap with Sears and DID NOT COST THEM A PENNY. Now Kmart and sears combined become the 3rd largest retailer in the US. By 2015, all debts should be paid off.
This is not only legal, the CEO of Kmart Holdings will make close to $1 Billion dollars on the move as the stock prices of both companies shot through the roof yesterday. If I were him, I'd be kissing Wal-Mart's ass right about now. It would not have happened if Wal-Mart were not such a threat to the US econommy.
