EUROPE YESTERDAY saw one of its biggest bankruptcies outside the banking sector since the start of the financial crisis when Germany’s Arcandor retail group filed for insolvency.
The company’s collapse followed weeks of pleading for help from the German government, which decided against any aid.
The move will affect 43,000 employees at Arcandor’s German operations, the 128-year-old Karstadt department store chain and the Primondo mail order business.
But the company insisted that Thomas Cook, the UK travel group in which it holds a 53 per cent stake, would “remain unaffected”.
Karl-Gerhard Eick, who took over as Arcandor chief executive in March, lobbied the German government last month to provide a state guarantee for €650 million of loans that were due for renewal this week.
But the conservative-led coalition turned down his application on Monday, as well as a request for an emergency state loan of €437 million, urging Arcandor’s banks and main investors, the founding Schickedanz family and private bank Sal Oppenheim, to put up more money first.
After a meeting with owners and creditors, Arcandor said yesterday “further requirements” demanded by Berlin “could not be fulfilled”, leaving it no alternative but to file for insolvency.
German chancellor Angela Merkel described the step as “inevitable” after Arcandor’s owners and creditors offered “absolutely insufficient” pledges of support.
“We have to take care of taxpayers’ money,” she said.
Her remarks stood in contrast to her government’s willingness to provide financial guarantees for Canadian carparts supplier Magna for its takeover of Opel, the German subsidiary of General Motors.
German economy minister Karl-Theodor zu Guttenberg, who had opposed the Opel bailout, yesterday dismissed the idea that 40,000 Arcandor jobs were at risk. Like Dr Merkel, he spoke of the “opportunities” the insolvency proceedings could bring.
Although Mr Eick said he hoped Arcandor would be able to come out of the process with its three main businesses – retail, mail order and tourism – intact, potential buyers were already voicing interest in parts of the company yesterday.
German retailer Metro repeated its hopes of taking half of Arcandor’s 127 Karstadt department stores and merging them with its Kaufhof chain.
German food retailing co-operative Rewe, meanwhile, said it would look at Arcandor’s Thomas Cook stake if it came on to the market. – (Copyright The Financial Times Limited 2009)
