After the Benko disaster: Galeria Karstadt Kaufhof is bankrupt again

Germany’s last major department store group, Galeria Karstadt Kaufhof, is once again filing for bankruptcy proceedings. It is the third in just a few years. It is unclear what will happen to the 90 department stores and more than 15,000 employees.

With a new owner, Galeria Karstadt Kaufhof (GKK) wants to get back to work. The department store group has filed for bankruptcy for the third time in three and a half years as a result of the difficulties faced by owner Signa. As the company announced on Tuesday in Essen, discussions with potential investors have begun.

Galeria has filed for bankruptcy at the Essen court. The more than 15,000 employees now have to fear for their jobs. It is not yet clear whether more locations will have to close. According to the company, business in the branches should continue to run normally.

Signa bankruptcies damage Galeria

“Galeria’s operational success is burdened by the preconditions of the old ownership structure. “We explicitly see today as a liberation,” says Galeria boss Olivier van den Bossche. “The Signa Group bankruptcies are causing enormous damage to Galeria, hampering ongoing operations and severely limiting future development opportunities due to high rents and expensive services.”

Galeria’s provisional liquidator, Stefan Denkhaus, said an investor process for the company would be launched at very short notice. The aim is “that we can end these insolvency proceedings within a period of seven to eight months”. There are already interested parties: “We are going to approach other interested parties. Existing interested parties can participate in this process.”

Uncertainty about multi-million dollar payments from Signa

This is the third bankruptcy for GKK within three and a half years. This was preceded by the difficulties of the parent company Signa. In recent weeks, several companies from the trading and real estate group of Austrian entrepreneur René Benko have filed for bankruptcy, including Signa Retail Selection AG, to which GKK belongs. In late November, the company announced it would close its operations in an orderly manner, which would mean selling GKK.

Only at the end of 2022 did the department store group have to seek salvation in a protective shield procedure. In March 2023, the creditors’ meeting approved the bankruptcy plan. Signa had promised 200 million euros for the renovation, which should flow in several tranches until 2025, with the first 50 million reportedly taking place in February.

It is still unclear whether GKK can expect payment. Austrian insolvency expert Karl-Heinz Götze of the creditor protection organization KSV1870 does not assume this. However, he did not know the relevant payment agreements, emphasizes Götze, whose organization is represented in the creditors’ committee of the holding company’s bankruptcy. The curator of Signa Holding did not want to comment on this when asked.

Federal agency: Galeria employees can receive insolvency pay

After the previous bankruptcy, the department store group had to close about forty branches. The last 18 of these will close later this month. Galeria then wants to continue to operate 92 department stores. Of the more than 15,000 people the company says it employs, most are permanent employees, while a smaller number are temporary workers.

The Federal Labor Office will pay insolvency money to employees of the Galeria Karstadt Kaufhof department store chain if the requested insolvency proceedings are opened. This is the result of consultation with the company and a detailed investigation into the requirements, a statement from the authority said.

In the two previous bankruptcy proceedings, Galeria’s creditors had waived claims worth billions so that the department store chain could find a way out of the crisis. The German state also helped with a lot of money: in 2021 and 2022, the Economic Stabilization Fund (WSF) helped the company with a total of 680 million euros. According to the spring 2023 insolvency plan, the WSF should receive only a small portion of the inventory utilization. (sda/awp/dpa)