Liabilities Subject To Compromise

3 Months Ended

Jun. 18, 2011

9.	Liabilities Subject to Compromise

As a result of the Bankruptcy Filing, the payment of pre-petition indebtedness is subject to compromise or other treatment under a plan of reorganization. Generally, actions to enforce or otherwise effect payment of pre-Bankruptcy Filing liabilities are stayed. Although payment of pre-petition claims generally is not permitted, the Bankruptcy Court granted the Debtor authority to pay certain pre-petition claims in designated categories and subject to certain terms and conditions. This relief generally was designed to preserve the value of our Company's businesses and assets. Among other things, the Bankruptcy Court authorized us to pay certain pre-petition claims relating to employee wages and benefits, customers, vendors, and suppliers.

We have been paying and intend to continue to pay undisputed post-petition claims in the ordinary course of business. In addition, we may reject pre-petition executory contracts and unexpired leases with respect to our operations, with the approval of the Bankruptcy Court. Any damages resulting from rejection of executory contracts and unexpired leases are treated as general unsecured claims and will be classified as "Liabilities subject to compromise" in our Consolidated Balance Sheets. We previously notified all known claimants subject to the bar date of their need to file a proof of claim with the Bankruptcy Court. A bar date is the date by which claims against our Company must be filed if the claimants disagree with the amounts included in our schedule of assets and liabilities filed with the Bankruptcy Court and wish to receive any distribution in the Bankruptcy Filing. The bar date of June 17, 2011 set by the Bankruptcy Court has passed. Thus far, claimants filed over nine thousand claims against our Company, asserting approximately $27.8 billion worth of liabilities. Our Company and our retained professionals are continuing to review and analyze the proofs of claim submitted by claimants and will investigate any material differences between these claims and liability amounts estimated by our Company. If necessary, in the event of a claims dispute, the Bankruptcy Court will make a final determination whether such claims should be allowed and, if so, the appropriate amount of such allowed claims. The ultimate amount of such liabilities is not determinable at this time.

Pre-petition liabilities that are subject to compromise are required to be reported at the amounts expected to be allowed, even if they may be settled for lesser amounts. The amounts currently classified as "Liabilities subject to compromise" may be subject to future adjustments depending on Bankruptcy Court actions, further developments with respect to disputed claims, determinations of the secured status of certain claims, the values of any collateral securing such claims, or other events. We expect that certain amounts currently classified as "Liabilities subject to compromise" may in fact be paid in the ordinary course as they come due. Any resulting changes in classification will be reflected in subsequent financial statements.

Liabilities subject to compromise consist of the following (in thousands):

	At		At
	June 18, 2011		February 26, 2011
Accounts payable	$	204,044	$	212,135
Accrued salaries, wages, and benefits		10,941		10,939
Self-insurance reserves		396,260		400,170
Closed locations reserves		11,354		50,550
Damages claim for rejected leases		168,796		106,642
Pension withdrawal liabilities		112,613		97,196
GHI liability for employee benefits		96,701		94,281
Accrued occupancy related costs for open stores		22,200		24,523
Deferred income		34,043		74,394
Deferred real estate income		34,995		89,309
Accrued audit, legal and other		6,886		8,118
Accrued interest		43,021		33,921
Other postretirement and postemployment benefits		41,831		41,655
Other accruals		9,310		8,005
Pension plan benefits		127,659		125,000
Deferred rent liabilities		51,524		56,287
Unfavorable lease liabilities		825		4,201
Other noncurrent liabilities		10,678		11,316
5.125% Convertible Senior Notes, due June 15, 2011		165,000		165,000
Related Party Promissory Note, due August 18, 2011		10,000		10,000
9.125% Senior Notes, due December 15, 2011		12,840		12,840
6.750% Convertible Senior Notes, due December 15, 2012		255,000		255,000
11.375% Senior Secured Notes, due August 1, 2015		260,000		260,000
9.375% Notes, due August 1, 2039		200,000		200,000
Other debt		2,525		2,714
Obligations under capital leases		110,337		121,058
Real estate liabilities		390,029		399,480
Total liabilities subject to compromise	$	2,789,412	$	2,874,734

Rejected Leases

During the 16 weeks ended June 18, 2011, we rejected 44 of our leases through the bankruptcy process. We reduced the reserves balance associated with these leases by $39.0 million, net to the allowance claim for damages of $168.8 million. The remaining closed locations reserves balance of $11.3 million pertains to locations for which the leases have not been rejected. In connection with the 44 rejected leases, the related deferred real estate income, unfavorable lease liabilities, obligations under capital leases and real estate liabilities were written off, all which were recorded to "Reorganization items, net" in our Consolidated Statements of Operations. Refer to Note 14 – Reorganization Items, Net, for further discussion of our rejected leases.

Non-debtor Financing Agreements

Intercompany financing agreements with foreign non-Debtor subsidiaries of $94.1 million are not reflected in the above liabilities subject to compromise table as these amounts were eliminated on a consolidated basis.