Kmart Corp.'s garbage hauler is asking a federal bankruptcy court to break its $2 million-a-month contract with the discount chain.
Weyerhaeuser Co. -- Kmart's primary trash hauler for the past decade -- claims it faces financial jeopardy unless the Troy-based retailer pays its outstanding bills, which could top $6.4 million.
According to court documents, two of Weyerhaeuser's subcontractors have said they soon will stop garbage pickup at half of Kmart's 2,114 stores until they are paid.
Weyerhaeuser claims Kmart is 30 days past due on $1.4 million in payments to the company and its subcontractors. It also says Kmart owes an additional $5 million for services rendered shortly before the retailer filed for Chapter 11 protection on Jan. 22.
Weyerhaeuser and about 200 subcontractors are responsible for waste removal and cardboard recycling at all of Kmart's stores. Weyerhaeuser is obligated to continue service until the judge says otherwise. Neither Weyerhaeuser nor Kmart would comment on the filing.
Weyerhaeuser is asking the court for some assurance that Kmart will either pay its debts or release Weyerhaeuser from its contract entirely.
Bankruptcy expert Gary Marsh said Weyerhaeuser is one of many companies that find themselves in a "gray area" because of the retailer's complicated bankruptcy filing.
"It's a difficult spot for the garbage hauler," especially because it might not receive any satisfaction on its request for months, said Marsh, a partner at Long, Aldrige & Norman LLP in Atlanta.
Like most bankrupt companies, Kmart received an "automatic stay," or protection from businesses seeking to collect on debts, stop shipments or sue Kmart during its reorganization, Marsh said. Kmart also receives time to determine which contracts it will maintain.