Berlin rejects loan request from retailer Arcandor


July 15, 2010 Updated Jun 8, 2009 at 11:01 AM CDT

German officials on Monday rejected a request by troubled retail group Arcandor for state loan guarantees, as the leading shareholder in travel agency Thomas Cook lurched towards insolvency.

A steering committee in Berlin "rejected the request by Arcandor for aid from the economic fund" established to help firms hit by Germany's worst postwar slump, a government spokesman said.

Arcandor had asked for 650 million euros (900 million dollars) in guarantees to help refinance loans that come due on Friday.

The group, which owns 52 percent of Thomas Cook, might have to file for insolvency and Finance Minister Peer Steinbrueck told ARD television Monday that "a bankruptcy is not totally excluded."

Arcandor has also requested 437 million euros in six-month credits from the state-owned development bank KfW, and warned it could go under if it does not get help from Berlin, which recently backed a multi-billion euro rescue plan for the car maker Opel.

But the government spokesman said officials had "considerable doubt about the viability of a concept" to turn the retail group around, and added that criteria for receiving public aid had "not been fulfilled."

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

Steinbrueck told ARD that "shareholders must assume their responsibilities" with respect to the group's long-running problems.

"Suppliers and property owners should also be solicited," he added after press reports said Arcandor was paying excessive rents on some stores.

Shares in the retailer plunged in midday trading on the Frankfurt stock exchange, losing one third of their value, 33.33 percent, to 1.26 euros while the MDAX index on which they are traded was off by 1.63 percent overall.

Arcandor has two dominant shareholders, the Oppenheim and Schickedanz families, each with around 30 percent of the group.

It is also mulling a possible merger with rival Metro, the biggest German retailer and owner of the Kaufhof chain, though those talks have bogged down.

"We are asking for the same treatment (as Opel), any rejection would be a catastrophe," works council head Hellmutt Patzelt was quoted by the daily Tagesspiegel as saying on Monday.

But the government has said its efforts on behalf of Opel were exceptional and that Arcandor must bear the consequences of poor management.

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

German media reports say Arcandor stopped paying rent on department stores owned by a group of investors led by US bank Goldman Sachs on June 1.

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