Bluelight.com Sale Opposed

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

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

The problem is that many of the companies who support Bluelight.com 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 Bluelight.com 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 Bluelight.com 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 Bluelight.com 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.

Bluelight.com 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 Bluelight.com, said they had no comment on the filings and would follow
Kmart’s lead for any actions that need to be taken.