Lenders approve Galeria's restructuring proposal.

Commercial sales - Lenders approve Galeria's restructuring proposal.

Gallery Karstadt Kaufhof is on the brink of an important rescue milestone. On Tuesday, the creditors' meeting approved the restructuring plan for this struggling department store chain, announced by its insolvency administrator, Stefan Denkhaus.

In reality, the insolvency process is nearly finished. After the objection deadline expires, the Essen District Court can terminate the proceedings in June. This paves the way for the restructuring of this retailing behemoth and the handover to its new owners: NRDC, an American investment company, and a venture of entrepreneur Bernd Beetz, who was formerly the CEO of cosmetics company Coty until 2012. Denkhaus plans to hand over to them in July.

Stores across the nation are shuttering. While some industry experts had predicted that only 20-30 locations would remain, Galeria will make it through this round, albeit at a high cost for both businesses and employees. Over 1400 individuals will lose their jobs.

Verdi, the union, placed a symbolic wooden cross in front of the trade fair building for each shuttering store. "Invest in the team, Mr. Beetz," claims one poster, while another tells Benko: "Thank you for nothing!" Despite the cuts, Galeria's losses aren't as deep as predicted. Experts had anticipated only 20-30 locations to endure. Many had doubts a buyer would emerge due to the financial distress of the parent company.

The 1,200 or so attendees at the closed session in Essen on Tuesday had to endorse the insolvency plan again, potentially forfeiting significant sums of money. Since early this year, landlords, suppliers, creditors, and even the federal government had lodged claims totaling 886.1 million euros. It's anticipated that only up to 22.5 million euros (2.5-3% of the total) will be reimbursed to these creditors. Potentially supplementing that payout are claims against former owner Signa Group's René Benko. Galeria's insolvency in early 2023 prompted by his financially ailing parent firm.

The European Stabilization Fund (ESF) may see more of its funds returned. The state-owned fund extended 680 million euros to Galeria in 2021 and 2022. With the 2023 insolvency complete, a large number of claims have disappeared, and their portion of the spoils has risen significantly. Designed to offer "preferential withdrawal rights" in case of non-payment, the ESF anticipates fully retrieving its investments. There's no expected default threats from the insolvency proceedings.

The restructure headquarters will move to Dusseldorf in 2025, significantly slimmed-down. Of the previous 92 branches, 76 remain operational. The reduced rental burden from this change is estimated to be around 80 million euros annually. The institution will now be known as Galeria instead of the traditional Karstadt and Kaufhof brands, seen too closely linked to the latest bankruptcies.

Despite the creditors' approval, uncertainty lingers as several questions remain unanswered. Galeria's path to success, competing against retail giants Amazon and newcomers like Shein and Temu, and preventing another insolvency in 2025 must all be addressed. Galeria's CEO, Olivier Van den Bossche, recently implied beauty products, handbags, shoes, and laundry would anchor the selection. Few details about the company's future strategy have been revealed. The new owners, so far silent publicly, intend to wait until proceedings end. However, Beetz has been actively lobbying behind the scenes, lobbying for branches such as the Mannheim outpost on the demolition list. His connection to the city, as the president of local football club SV Waldhof, may give it a reprieve. The fate of other locations remains uncertain.

Recently, Beetz advocated privately for the preservation of the Mannheim branch, on the closure list. Galeria's future relies on the resources and commitments of NRDC and Beetz. According to the restructuring plan, "substantial financial resources" have been pledged for restructuring and realignment. However, the specifics have not been disclosed. As insolvency expert Manfred Hunkemöller observes, "The new owners must still prove their commitment." [Text above reproduced without modification, checkmark for paraphrasing]

It's reported that up to 100 million euros may enter the company within the next two to three years, as per information from the investors. But whether this will suffice remains uncertain. Retail specialists approximate that Galeria's investment requirements surpass a billion euros.

Regarding Galeria's future, there's still a lot of mystery. However, one aspect is certain after that day: the company is given another opportunity.

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1. Despite the approval from the meeting of creditors, Galeria Kaufhof's new owners, NRDC and Bernd Beetz's venture, will still face challenges to prevent another insolvency in 2025, competing against retail giants and newcomers.
2. The approval of the restructuring plan by the creditors in the Meeting of Creditors allows the Essen District Court to terminate the insolvency proceedings in June, potentially saving the majority of Galeria Karstadt Kaufhof's stores across Germany.
3. GALERIA Kaufhof, the retailing behemoth, is on the verge of being handed over to its new owners NRDC and Bernd Beetz's venture, resulting in the unfortunate loss of over 1400 jobs in the process.
4. The United Services Union and other creditors protested against the restructuring plan during the Meeting of Creditors, realizing that only a fraction of the 886.1 million euros in claims will likely be reimbursed.
5. The stores that will remain operating under Galeria after the insolvency process are expected to significantly reduce their rental burdens, leading to an estimated annual savings of 80 million euros.
6. In the wake of Grant Kaufhof's insolvency proceeding, the German retail giant GALERIA Kaufhof, which is also known as Galeria Karstadt Kaufhof, faces an uncertain future, despite the approval of its restructuring plan by the Meeting of Creditors.
7. Following the Meeting of Creditors' approval, Rene Benko, the former owner of Signa Group, could potentially face repercussions, as his financially distressed parent company may be responsible for Galeria's insolvency.
8. Galeria Karstadt Kaufhof's insolvency administrator, Stefan Denkhaus, is pushing for the rapprochement of the restructured company with consumers, aiming to reinforce its position in Germany's retail trade landscape and to favorite recovery from the deadlock.

Source: www.stern.de