Rescue takes last hurdle
Creditors approve insolvency plan for Galeria
28.05.2024, 13:48
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The creditors are paving the way for the department store company to be restructured. Even though this has given employees some clarity, it is not yet clear what will happen to the department store chain in the future.
Galeria Karstadt Kaufhof has overcome the last major hurdle to its rescue. The creditors’ meeting at the Essen trade fair approved the plan to restructure the ailing department store chain, as insolvency administrator Stefan Denkhaus announced. The insolvency proceedings are now formally nearing completion. After the objection period has expired, the responsible Essen district court can lift the proceedings in June. Then the way will finally be clear for the retail giant to be restructured and taken over by the new owners: the US investment company NRDC and the holding company of the entrepreneur Bernd Beetz, who was CEO of the cosmetics group Coty until 2012. Denkhaus wants to hand over to them in July.
The employees already have a lot of clarity. The trembling after the third bankruptcy in less than four years is over for now. Contrary to what some retail experts had predicted, Galeria is continuing. Nevertheless, the company and employees are once again paying a high price. Branches are closing again across Germany, and 1,400 people are losing their jobs.
The Verdi union put up a symbolic wooden cross for each locksmith branch in front of the exhibition building. “Mr. Beetz, invest in the team,” reads one of the posters. Another reads: “Benko, thanks for nothing!” The cuts at Galeria are not nearly as severe as expected. Experts had predicted in January that at most 20 to 30 locations would remain. Many expressed doubts that anyone would be interested at all.
Around 120 people, representing around 4,600 creditors, took part in the non-public event in Essen. They will have to forego a lot of money once the insolvency plan has been accepted. In recent weeks, landlords, suppliers and other creditors such as the federal government have filed claims totaling 886.1 million euros. They are expected to receive only up to 22.5 million euros – that is 2.5 to 3 percent – back. Payments from claims against the previous owner, the Signa Group owned by entrepreneur René Benko, could increase the figure even further. Because the financially troubled parent company failed to provide promised aid, Galeria slipped into insolvency again at the beginning of the year.
The Economic Stabilization Fund (WSF) will receive more money back. The state stabilization fund had given Galeria a helping hand with 680 million euros in 2021 and 2022. A large part of the claims had been lost in the course of the insolvency proceedings concluded in 2023. A so-called subordinated loan of 88 million euros was continued. Because new collateral was agreed for this in the event of a default, the WSF has “priority separation rights” from the insolvency estate. The responsible financial agency expects that the claims will now be met in full. No further defaults are to be expected in the course of the new insolvency.
Karstadt and Kaufhof disappear from the name
The insolvency administrator has laid the foundation for the new beginning. Denkhaus’ main goal was to make the group more of a medium-sized company. The company headquarters in Essen will be closed. In 2025, the administration will move – significantly streamlined – to a branch in Düsseldorf. Of the 92 branches, 76 will remain. This will reportedly reduce the rental burden by around 80 million euros per year. The name will also change. In future, the department store chain will be called Galeria, and the large, traditional brands Karstadt and Kaufhof will disappear. They are too closely linked to the recent bankruptcies, it is said.
And yet doubts and uncertainty have not disappeared even with the creditors’ yes. This is also because many important questions remain unanswered. How can Galeria get back on the road to success? How can it hold its own against retail giants like Amazon and new portals like Shein and Temu? And how can the department store company be prevented from getting into trouble again in 2025?
Beauty products, handbags, shoes and underwear are to be the focus of the range. Galeria boss Olivier Van den Bossche recently announced this. Not much more is known about the future direction. The new owners have so far remained tight-lipped publicly. They said they wanted to wait until the process was completed. However, Beetz has recently been heavily involved in the background. For example, he campaigned for the Galeria branch in Mannheim, which is on the closure list, to remain open. Beetz has close ties to the city; he grew up in Mannheim and is president of the local third division football club SV Waldhof. It is not yet clear whether this location and others will be removed from the cut list.
100 million euros in the next few years
What will be decisive is what Beetz and the investment company NRDC, headed by former Kaufhof owner Richard Baker and his son Jack, put into the department store chain. The insolvency plan states that they have pledged “extensive financial resources” for restructuring and reorientation, but not how much. “The new owners still have to show that they are serious. That is not clear from the insolvency plan,” said insolvency expert Manfred Hunkemöller.
Up to 100 million euros are to be invested in the next two to three years, according to sources close to the investors. Whether that is enough is at least questionable. Retail experts estimate that Galeria will need to invest more than a billion euros. Much is still unclear about the future of the department store company. But one thing has been clear since that day: Galeria will be given another chance.