Case | HBS Case Collection | August 2008 (Revised May 2009)

Kmart and ESL Investments (A)

by Stuart C. Gilson and Sarah Abbott

Abstract

A major bankrupt retailer is poised to emerge from Chapter 11. Two activist hedge funds ("vulture investors") will own over 50% of reorganized Kmart's common stock, based on prior investments in Kmart's debt claims, and an infusion of new equity financing. The Chapter 11 process has generated both costs and benefits for the company. Its future profitability, and the value of the reorganized business, are both highly uncertain.

Keywords: Restructuring; Capital Structure; Insolvency and Bankruptcy; Investment; Investment Activism; Valuation; Financial Services Industry; Retail Industry; United States;

Citation:

Gilson, Stuart C., and Sarah Abbott. "Kmart and ESL Investments (A)." Harvard Business School Case 209-044, August 2008. (Revised May 2009.)