Liabilities Subject To Compromise

6 Months Ended

Sep. 10, 2011

Liabilities Subject To Compromise

Liabilities Subject To Compromise

10.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 normal 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 $27.9 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 normal course of business 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
	September 10, 2011		February 26, 2011
Accounts payable	$	176,927	$	212,135
Accrued salaries, wages, and benefits		10,949		10,939
Self-insurance reserves		389,269		400,170
Closed locations reserves		3,011		50,550
Damages claim for rejected leases		186,751		106,642
Pension withdrawal liabilities		113,922		97,196
GHI liability for employee benefits		101,846		94,281
Accrued occupancy-related costs for open stores		22,766		24,523
Deferred income		33,941		74,394
Deferred real estate income		14,918		89,309
Accrued audit, legal and other		6,875		8,118
Accrued interest		49,845		33,921
Other postretirement and postemployment benefits		41,887		41,655
Other accruals		2,981		8,005
Pension plan benefits		130,085		125,000
Step rent liabilities		24,214		56,287
Unfavorable lease liabilities		795		4,201
Other noncurrent liabilities		10,123		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		2,473		2,714
Obligations under capital leases		53,649		121,058
Real estate liabilities		189,332		399,480
Total liabilities subject to compromise	$	2,469,399	$	2,874,734

Rejected Leases

During the 12 and 28 weeks ended September 10, 2011, we rejected 19 and 63 of our leases, respectively, through the bankruptcy process, reducing the closed locations reserves balance associated with these leases by $13.5 million and $52.6 million, respectively, net to the allowable claim for damages of $186.8 million as of September 10, 2011. The remaining closed locations reserves balance of $3.0 million pertains to locations for which the leases have not been rejected. In connection with the rejected leases during the 12 and 28 weeks ended September 10, 2011, 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 15 – Reorganization Items, Net, for further discussion of our rejected leases.

Assumed Leases

During the 12 weeks ended September 10, 2011, our Company assumed 330 real estate leases, including leases for shopping center tenants as well as leases for subleased locations. In connection with the assumption of the leases, the related liability balances previously classified as "Liabilities subject to compromise" were reclassified to the respective balance sheet captions in our Consolidated Balance Sheets. In addition, all undisputed cure amounts related to these leases in the amount of $6.8 million have been paid to the landlords.

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.