Kmart Receives Court Approval for $2 Billion in Exit Financing

Kmart Corporation (Pink Sheets: KMRTQ) today announced that it has received bankruptcy court approval for the $2 billion in exit financing from GE Commercial Finance, Fleet Retail Finance Inc. and Bank of America, N.A. This credit facility, which will be secured by inventory, would replace the Company's current $2 billion debtor-in-possession (DIP) facility on the effective date of Kmart's Plan of Reorganization. The financing is subject to the satisfaction of customary conditions to closing and would be available to Kmart to help meet its ongoing working capital needs, including borrowings for seasonal increases in inventory.

Kmart also received court approval for its plan to close up to 318 stores, as well as a distribution center in Corsicana, Texas. Today, rent concession negotiations were completed on the store located in Mill Hall, PA which will now remain open. A second store, in Chesterfield Township, MI, may remain open pending the outcome of ongoing negotiations for rent reductions. The store closing program is intended to enhance the Company's financial and operating performance by allowing it to further reduce costs, improve cash flow, streamline distribution and focus its resources more efficiently. Kmart will continue to operate more than 1,500 stores in convenient locations across the United States, the Caribbean and Guam.

The number of closing stores was reduced from the 326 announced on January 14, 2003, as a result of the completion of successful lease negotiations with landlords at nine stores. The nine store locations (three Kmart SuperCenters and six Kmart stores) that will remain open are:

  Kmart SuperCenter
  500 Carson Town Center
  Carson, CA

  Kmart SuperCenter
  6780 West Washington
  Indianapolis, IN

  Kmart
  3083 Miller Road
  Flint, MI

  Kmart
  1 Millbrook Plaza
  Mill Hall, PA

  Kmart
  1000 Nutt Road
  Phoenixville, PA

  Kmart
  Ave Jesus T Pinero 4010
  Cayey, PR

  Kmart
  4565 South First Street
  Abilene, TX

  Kmart SuperCenter
  3901 Holland Road
  Virginia Beach, VA

  Kmart
  151 Easy Street
  Wenatchee, WA

The closing stores will continue to remain open pending completion of inventory clearance sales, which are expected to begin January 30. The store closing process is expected to last approximately 10 to 12 weeks. The distribution center is slated to close in March.

Julian Day, President and Chief Executive Officer of Kmart, said, "We are pleased that key elements of our emergence plan -- the $2 billion exit financing, the DIP amendment and the closing of underperforming stores -- were approved by the bankruptcy court. While closing underperforming stores is critical to enhancing the Company's financial and operating performance, we regret the negative impact this action will have on the affected associates, families, customers and communities. We are continuing to move forward on a timetable that would allow Kmart to complete its reorganization and emerge from Chapter 11 by April 30, 2003. We look forward to putting the costs and distractions of bankruptcy behind us so that we can focus on serving our customers in more than 1,500 stores in over 570 markets."

The Bankruptcy Court also approved an amendment to Kmart's DIP credit facility that permits the additional store closings and adjusts the covenant pertaining to the Company's cumulative EBITDA (earnings before interest, taxes, depreciation and amortization) over specified periods to provide the Company with additional flexibility going forward.

Kmart Corporation is a mass merchandising company that serves America through its Kmart and Kmart SuperCenter retail outlets. The Company's common stock is currently quoted on the Pink Sheets Electronic Quotation Service (www.pinksheets.com ) under the symbol KMRTQ.

Cautionary Statement Regarding Forward-Looking Information

Bankruptcy law does not permit solicitation of acceptances of the Plan until the Court approves the applicable Disclosure Statement relating to the Plan as providing adequate information of a kind, and in sufficient detail, as far as is reasonably practicable in light of the nature and history of the debtor and the condition of the debtor's books and records, that would enable a hypothetical reasonable investor typical of the holder of claims or interests of the relevant class to make an informed judgment about the Plan. Accordingly, this announcement is not intended to be, nor should it be construed as, a solicitation for a vote on the Plan.

Statements made by Kmart which address activities, events or developments that we expect or anticipate may occur in the future, including certain of the information contained in the Plan and Disclosure Statement, are forward- looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that reflect the Company's current views with respect to current and future events and financial performance. Such forward-looking statements are and will be, as the case may be, subject to many risks and uncertainties, including, but not limited to, Kmart's having filed for bankruptcy and factors relating to Kmart's operations and the business environment in which Kmart operates, which may cause the actual results of Kmart to be materially different from any future results expressed or implied by such forward-looking statements. Factors that could cause actual results to differ materially from these forward-looking statements include those set forth in Kmart's Annual Report on Form 10-K/A for the fiscal year ended January 30, 2002, Kmart's Quarterly Report on Form 10-Q for the fiscal quarter ended October 30, 2002, or in other filings made, from time to time, by Kmart with the Securities and Exchange Commission (the "Company Filings"). The forward-looking statements speak only as of the date when made and Kmart does not undertake to update such statements.

Similarly, these and other factors, including the terms of any reorganization plan ultimately confirmed, can affect the value of our various pre-petition liabilities, common stock and/or other equity securities. No assurance can be given as to what values, if any, will be ascribed in the bankruptcy proceedings to each of these constituencies.

A plan of reorganization could result in holders of Kmart common stock receiving no distribution on account of their interest and cancellation of their interests. As described in the Company's Quarterly Report on Form 10-Q, holders of Kmart common stock should assume that they could receive little or no value as part of a plan of reorganization. In addition, under certain conditions specified in the Bankruptcy Code, a plan of reorganization may be confirmed notwithstanding its rejection by an impaired class of creditors or equity holders and notwithstanding the fact that equity holders do not receive or retain property on account of their equity interests under the plan. In light of the foregoing, the Company considers the value of the common stock to be highly speculative and cautions equity holders that the stock may ultimately be determined to have no value.

Accordingly, the Company urges that appropriate caution be exercised with respect to existing and future investments in Kmart common stock or any claims relating to pre-petition liabilities and/or other Kmart securities.

SOURCE: Kmart Corporation

CONTACT: Kmart Media Relations, +1-248-463-1021

Web site: http://www.kmart.com/