Bankruptcy speculation hits Kmart

The Associated Press

DETROIT -- Shares of Kmart Corp. stock dropped below $2 Wednesday as credit agencies cut its debt ratings amid speculation the discount retailer is considering filing for bankruptcy.

Kmart has been struggling to compete against the lower prices of rivals Wal-Mart Stores Inc. and Target Corp., battling the nationwide recession while mounting its aggressive restructuring effort.

In a news release announcing ratings downgrades, Fitch Inc. said it appears increasingly likely Kmart will choose to file for bankruptcy.

Sources close to the company, who spoke to The Associated Press on condition of anonymity, said the possibility of filing for Chapter 11 was discussed at a regularly scheduled meeting of Kmart's board of directors this week. So far, the company has remained silent on its financial future.