RealTime IT News Sale Opposed

KMart's bankruptcy bid to sell off its Internet service provider arm has run afoul of some of the companies who helped get off the ground.

The retail giant announced Oct. 11 it would sell to national ISP United Online for $8.4 million, while keeping a commissions-based service open to continue the offering.

The problem is that many of the companies who support aren't happy with the details of the arrangement, which awaits approval by the judge presiding over KMart's Chapter 11 bankruptcy proceedings.

Microsoft filed an objection to the proposed sale recently to determine what will happen to the software licenses the ISP currently holds, and whether they will be transferred to United Online as part of the sale.

A group of creditors, led by J.P. Morgan, wonder where the $8.4 million will go. As lenders, they helped build up the infrastructure -- the equipment, the facilities, the payroll -- and want to make sure they get the bulk of that firesale money, not have it end up in Kmart's coffers.

Abagail Jacobs, a spokesperson, said the company wouldn't comment Microsoft or J.P. Morgan's filings, but would be filing a response to the opposition with the U.S. Bankruptcy Court in Chicago later today. She also said the company remains confident the sale will pass muster with the bankruptcy judge.

J.P. Morgan is especially leery of losing any of the $2 billion debtor-in-possession financing it floated Kmart in January, after the company announced bankruptcy. was one of the first entities to enter the chopping block after Kmart announced its bankruptcy. The retail giant, more comfortable with its "real world" divisions, didn't want to put more money into an operation that was continually losing money.

Officials at United Online, the company which hopes to take over management of, said they had no comment on the filings and would follow Kmart's lead for any actions that need to be taken.