On the way to rescue from bankruptcy, the ailing department store group Galeria Karstadt Kaufhof has reached an important milestone. As expected, the Essen District Court opened insolvency proceedings for the company at the beginning of April, according to a court announcement published on Tuesday.
This means that creditors can now register their claims against Galeria Karstadt Kaufhof (GKK) with the insolvency administrator. Attorney Stefan Denkhaus, who had previously been appointed as provisional administrator, was appointed as the insolvency administrator. The Verdi union described the bankruptcy as “still bitter” for the employees, but believes in the future of department stores in city centers.
Discussions with bidders are already underway
Discussions with a possible new owner for the company are already underway. The binding offer period expired a week ago. Denkhaus announced last week that there were four bidders. Final negotiations should take place with two of them. “Both interested parties have extensive experience in German retail and also have the funds required for the upcoming investment,” Denkhaus said. He did not name the possible investors.
With the opening of the proceedings, Denkhaus takes over Galeria’s business. He wants to complete the sale sometime in April. The final decision on a takeover by a new owner is made by the meeting of creditors. According to the announcement, this will meet on May 28th at Messe Essen to vote on the insolvency plan drawn up by Denkhaus.
“60 plus X” branches should remain
At the beginning of January, Galeria filed for insolvency with the Essen district court. It is the third bankruptcy within three and a half years. The number of branches of the department store chain has halved during this period; there are currently 92 left. How many remain is still open. According to Denkhaus, it will involve taking over at least “60 plus X” branches. “We don’t yet know how big this X is,” he said last week.
If 60 branches remained after the sale, about one in three would close. Many of the 12,800 employees therefore have to fear for their jobs. “We try to maintain the best possible branch network and really fight for every branch,” said Denkhaus. The number of remaining Galeria locations depends primarily on the ongoing negotiations with the landlords.
Rents should be reduced
The insolvency administrator’s goal is to reduce rents. Depending on the branch, he aims for a sales rent of seven to eleven percent, or a little more if business is doing particularly well. “It makes no sense to continue a branch with a rent burden of more than 30 percent,” says Denkhaus. In the branches that are located in properties owned by Signa, the rents are often significantly higher. According to its own information, the company pays up to 30 percent of sales there. Denkhaus had already announced in January that it would close branches if there was no accommodation from the landlord.
Verdi: Insolvency is “bitter” for employees
The Verdi union pointed out the difficult situation of Galeria employees. “This insolvency continues to be bitter for the employees. They have forgone parts of their wages for years in order to save their jobs,” said Verdi federal board member responsible for retail Silke Zimmer when asked by the German Press Agency. Due to the insolvency of the Signa parent company, Galeria once again got into economic difficulties. “It is once again unclear for the employees and their families what will happen next for them.”
The fact that there are several potential investors for GKK is good news. “Our requirement for a new investor is to maintain the branch and thus have a long-term interest in the department store company,” Zimmer continued. She expressed her conviction about the future viability of the retail concept: “Department stores are the heart of many city centers. They offer customers goods and good advice in a breadth and depth that they cannot get anywhere else.” The Galeria employees are primarily responsible for this. “You are the face of the department store. This is where you invest in the future.”