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Jun 10, 2009

Arcandor files for bankruptcy

German retailer Arcandor AG filed for bankruptcy protection Tuesday in an effort to salvage its department stores and its mail-order arm, a day after the government rejected its bid for state-backed emergency credit.

Arcandor said in a statement it filed with the district court in Essen, where it is based.

"Through filing for protection, our aim is to continue restructuring the company and its subsidiaries in an effort to ensure their survival," the company said.

Arcandor units including the Karstadt Warenhaus GmbH department stores and the Quelle GmbH mail-order company were involved in the filing.

Units not involved include travel operator Thomas Cook Plc, in which Arcandor holds a majority stake, and its home-shopping channel HSE 24, the statement said.

The government on Monday rejected a bid from Arcandor for euro437 million ($610 million) in state-backed credit.

"Following that, there was no sustainable financial perspective," the company said. "As of June 12, when short-term loans of euro710 million will be due, we will be insolvent."

Arcandor said that some 43,000 employees in Germany would be affected by the proceedings. They will receive their paychecks through August and then will be eligible to file for special state benefits.

"As part of the bankruptcy protection proceedings we will fight to maintain as many jobs and stores as possible," said Karl-Gerhard Eick, chairman of Arcandor's management board.

Chancellor Angela Merkel, who had repeatedly voiced skepticism about a government bailout of Arcandor, described the filing as "an unavoidable step whose opportunities should now be used."

"The pledges by the owners and creditors were absolutely not enough for us," Merkel told reporters. "We have to take care of tax money."

Merkel said Economy Minister Karl-Theodor zu Guttenberg would soon speak with Arcandor employee representatives "because the government has a great interest in being helpful."

"We have always said that an insolvency filing can offer the possibility to put the company on new feet and open up prospects for it," Merkel told reporters.

She said she saw opportunities for jobs in joining up with other companies, such as Metro AG, the owner of rival department store chain Kaufhof.

Metro spokesman Ruediger Stahlschmidt said after Tuesday's filing for bankruptcy protection that his company was still interested in taking over some 60 of the 90 Karstadt department stores and their employees.

Metro has proposed a merger that would produce one large retail company, though negotiations so far have made little headway.

"We hope ... that we will be able to return to talks next week," Stahlschmidt said.

Earlier in the day, the Economy Minister Karl-Theodor zu Guttenberg had spelled out the requirements for any government backing, including "significant contributions" from its owners and a debt moratorium from creditor banks.

Arcandor shares fell 48 percent to close at euro0.55 on Tuesday.

Source : AP
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