Two retailers attempting to restructure their finances have made major announcements this week. Toy retailer FAO Schwartz ended its fight to stay out of bankruptcy (see 'FAO Schwartz Teeters on the Edge of Bankruptcy') and filed for Chapter 11 protection on Monday after failing in its efforts to restructure its loans from Well Fargo Retail Finance. On Tuesday the bankruptcy judge gave the company the right to use its cash collateral to pay bills and employees until January 29th, when a hearing will be held.
Meanwhile K-Mart, which is attempting to emerge from Chapter 11 this spring, announced on Tuesday that it would close another 326 of its 1,800 stores and a distribution center and eliminate around 35,000 jobs. The 326 stores represent over one sixth of its remaining stores; 283 stores were closed in 2002. K-Mart also announced that it has secured $2 billion in new financing to help it emerge from bankruptcy. The chain also announced earnings of $349 million on sales of $4.7 billion in December. When that happens the existing creditors will get common shares, while the current common shareholders lose all value of their holdings.