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German store Karstadt insolvency procedures underway

April 2, 2024

The insolvency bid aims to allow the ailing department store chain to break free of its owner, Austrian real estate giant Signa, which collapsed last year and itself filed for insolvency.

Passers-by walk past a closed entrance to the Karstadt shop at Munich Central Station.
The ailing department store has suffered due to the advent of online shopping, with its owner's financial woes adding to its own strugglesImage: Peter Kneffel/dpa/picture alliance

Ailing German department store chain Galeria Karstadt Kaufhof has filed for insolvency for the third time, this attempt though believed to be in a bid to break free of its struggling owner.

A court in the western city of Essen announced the move on Tuesday, saying it opened the proceedings a day before.

Lawyer Stefan Denkhaus is to continue as the insolvency administrator, taking over the management of the store's chain business.

What do we know about the sale of Karstadt?

Denkhaus says he is planning to finalize the sale of the company to new investors within the current month. Talks for the sale are underway, with four bidders submitting initial bids, he added, saying that two of the bidders were now in the final negotiations.

"Both interested parties have extensive experience in the German retail sector and also have the necessary funds for the upcoming investment," Denkhaus said without disclosing the names of the potential investors.

However, a report in the Süddeutsche Zeitung said that none of the bidders is willing to take over all of the 92 remaining department stores, which employ over 15,000 people.

A final decision on the sale will be made by the chain's creditors. A meeting has been penciled for May 28 in Essen.

Karstadt's financial woes

Once a household name in Germany, Karstadt reigned in the retail sector for the greater part of a century since it was founded in 1881. Its financial troubles began in the 1980s, further escalating since with the advent of online shopping taking over the market.

In 2018, Karstadt merged with its longtime rival and competitor Galeria Kaufhof, when Austrian real estate giant Signa took over the two German brands.

Germany’s Kaufhof and Karstadt to merge

Galeria Karstadt Kaufhof filed for insolvency for the first time in 2020, seeking state aid amid the Covid-19 pandemic. A second insolvency procedure followed in 2023, and again on January 9, this time due to its owner Signa's own financial struggles.

rmt/rc (AFP, dpa)

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