The November 6, 1995, edition of The Wall Street Journal contains an article by Linda Sandler entitled "Kmart Is Pressured Over Obscure Bond 'Puts,' Which Stir Worries Amid Tough Retail Times."

\section*{Instructions}

Read the article and answer these questions:

(a) What is the total dollar amount of the bond issue in question? Who purchased these bonds?

(b) What right does the "put option" give to bondholders?

(c) What amount is available under Kmart's bank lines? Why can't Kmart borrow under these lines to purchase the bonds? What is the most likely solution to the problem?

(d) Were the terms of the put bonds adequately disclosed?