Creditors accept Galeria's bankruptcy proposal.

Creditors accept bankruptcy scheme for Galeria.

The creditors have made way for the restructuring of the department store company. The employees are unsure how the department store chain will move forward, as a final decision has yet to be made.

Galeria Karstadt Kaufhof has taken the last major step towards its rescue. The creditors' meeting in Essen approved the plan for the restructuring of the struggling department store chain, as per insolvency administrator Stefan Denkhaus.

Formally, the insolvency proceedings are almost complete. After the objection period expires, the Essen district court can terminate the proceedings in June. This will allow for the restructuring of the retail giant and its takeover by new owners: these are the US investment company NRDC and the participation company of entrepreneur Bernd Beetz, who previously served as CEO of cosmetics company Coty. Denkhaus plans to hand over the company to them in July.

The employees now have some clarity. The unpredictability after the third insolvency in less than four years is now over for the time being. Despite predictions from some retail experts, Galeria will continue its operations. However, the company and its employees are paying a high price for this - stores are closing, resulting in the loss of 1400 jobs.

Creditors give up on money

The union Verdi erected a symbolic wooden cross in front of the exhibition center for each closing store. "Mr. Beetz, invest in the team," reads one poster. Another one says: "Benko, thank you for nothing!" The damage to Galeria was not as dire as predicted. Experts had estimated that at most 20 to 30 locations would remain. Many doubted that a buyer would even be found.

At the closed-door event in Essen, around 120 people participated, representing about 4600 creditors. They need to accept the insolvency plan once more and give up a lot of money. Over the past few weeks, landlords, suppliers, and other creditors, including the Federal Association, have filed claims totaling 886.1 million euros. It is expected that only up to 22.5 million euros - 2.5 to 3 percent - will return to them. Claims against the struggling parent company, the Signa Group of entrepreneur René Benko, may increase the ratio. Since the financially troubled parent company failed to provide the promised support, Galeria slid back into insolvency at the start of the year.

More money will flow back to the Economic Stabilization Fund (WSF). The state-owned stabilization fund provided Galeria with 680 million euros in 2021 and 2022. A significant portion of the claims has decreased in the course of the 2023 insolvency proceedings. A so-called subordinated loan of 88 million euros was continued. Since new securities were agreed for the case of payment default, the WSF has "first rights" from the insolvency estate. The responsible financial agency expects that the claims will now be completely met. No further defaults are expected in the future.

The foundation for the new beginning has been laid by the insolvency administrator. The goal is to restructure the conglomerate. The headquarters in Essen will be abandoned. The management is set to move to a branch in Düsseldorf in 2025 - significantly reduced in size. Of the 92 branches, 76 will remain. The rental burden has decreased by approximately 80 million euros per year as a result. The name will also change. The department store chain will be known as Galeria in the future, with the large, traditional brands Karstadt and Kaufhof disappearing. These are considered too closely linked to the most recent bankruptcies.

However, doubts and uncertainty haven't completely vanished with the approval of the creditors. This is also due to the fact that many key questions remain unanswered. How does Galeria return to success? How does it compete with retail giants like Amazon and new portals like Shein and Temu? And how can the department store chain be prevented from falling into insolvency again in 2025?

Beauty products, handbags, shoes, and linen will be the focus of the assortment, announced Galeria CEO Olivier Van den Bossche. Little else is known about the future course. The new owners have remained silent in public so far. They plan to wait until the proceedings are completed, it was said. However, Beetz has been active in the background. He fought for the Galeria branch in Mannheim, which is on the closure list. Beetz is closely connected to the city, having grown up in Mannheim and being president of the local third-division football club SV Waldhof. It's still unclear whether this location and others will be removed from the closure list.

It will be vital to see what Beetz and the investment company NRDC, who were previously the owners of the former Kaufhof shareholder Richard Baker and son Jack, bring to the department store chain. The insolvency plan states that they have "committed to providing extensive financial resources" for restructuring and reorientation, but not how much. "The new owners need to show that they're serious. That's not clear from the insolvency plan," said insolvency expert Manfred Hunkemöller.

According to a group of investors, up to 100 million euros will be directed toward Galeria within the next two to three years. However, this figure seems doubtful considering that retail experts estimate Galeria's investment requirements to exceed a billion euros. The future of the department store company is also uncertain. The only certainty is that Galeria is being given another opportunity to thrive.

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After the approval of the insolvency plan, the creditors have to accept a significant loss of their funds. Initially, they had filed claims totalling 886.1 million euros, but it's expected that only up to 22.5 million euros will return to them, which equates to just 2.5 to 3%.

Galeria Karstadt Kaufhof's insolvency has led to challenging times for its creditors, including landlords and suppliers, who face significant financial losses.

Source: www.ntv.de