German finance minister: Arcando faces insolvency

By AFP

July 15, 2010 Updated Jun 8, 2009 at 4:01 AM CDT

German Finance Minister Peer Steinbrueck has said the retail group Arcandor, which owns the Kardstadt chain and a majority share of Thomas Cook, could go bust.

"A bankruptcy is not totally excluded," Steinbrueck told ARD television on Monday, adding: "Shareholders must assume their responsibilities" with respect to the group's long-running problems.

Arcandor, which owns 52 percent of the travel group Thomas Cook, has said it could file for insolvency on Monday unless it obtains 437 million euros (610 million dollars) in credit from the government.

The company wants to tap a government fund set up to help companies hit by Germany's worst postwar slump.

The group is also negotiating a possible merger however with German rival Metro, the biggest German retailer and owner of the Kaufhof chain, though the talks have run into obstacles.

Arcandor employs 50,000 staff but its call for state aid has left many observers cold because its was already facing problems before the global economic crisis slammed Europe's biggest economy in mid 2008.

The government, which recently backed a plan to save automaker Opel, said that was an exceptional operation and that Arcandor must take responsibility for poor management.

The European Commission has also expressed hostility towards state aid for the German retailer.

German media reports said on Sunday that Arcandor has stopped paying rent on its department stores -- owned by a group of investors led by US bank Goldman Sachs -- on June 1.

Around 600 million euros' worth of loans to the retailer come up for refinancing on Friday.

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