Galeria bankruptcy: the federal government loses around 600 million euros

Such a meeting of creditors is a special event, and this Monday in Essen’s Grugahalle is no different. For people who are not in the field, it all seems like blackmail. Take it or leave it, that’s basically the spectacle that is performed in the exhibition hall between two parties. Confusingly, one is called debtor and is the department store group Galeria Karstadt Kaufhof or the owner René Benko behind it. The other side knows about the two that they don’t owe anyone anything and that there is hardly anything to get. At most a little bit.

The other side are the creditors. About 40 of them came, including employees, suppliers, landlords, but one in particular: the state, represented by the Federal Finance Agency. He was the biggest creditor because he helped Galeria with a total of 680 million euros over the past two years. There are also other benefits that are not included in the total, such as short-time work benefits or the assumption of personnel costs in the past few months.

Not much is left of the creditors’ money. According to reports, about 90 million euros will remain of the 680 million euros in state aid. But one should not hide oneself from these 90 million. Shortly after the end of the event, which lasted less than two hours, Galeria announced: “There are 50 million euros available to satisfy creditors.” The state will therefore receive its share from the 50 million euro pot. At best, he gets the 90 million euros from the sale of collateral, such as inventory or trademark rights.

The word “satisfaction” does not mean that the creditors are actually satisfied or even satisfied. They had little choice. If they had not agreed to the debtor’s proposal, they might have been left with nothing. In any case, that was the threat that the debtor could use. The creditors waived billions of dollars in claims against the debtor – for the second time in two and a half years.

In 2020, shortly after the merger of Karstadt and Kaufhof, Galeria went bankrupt for the first time. At the end of October 2022, the department store filed for bankruptcy again despite the generous state aid. In between there were state-imposed corona lockdowns, which hit the department store hard and cost the group millions of euros in sales. According to the bankruptcy plan, revenue grew again after the forced closures ended. The approval of the district court in Essen is now required for the payment of the 50 million euros – which is considered a formality.

However, the final act of the spectacle of insolvency proceedings under self-administration is not quite over yet. Nonetheless, one of the highlights was reached this Monday with the creditors’ meeting. This also includes the declaration of the goodwill of the debtor. In return for the creditors’ waiver, she vowed to be willing to invest in the future of the company herself. “The Galeria shareholder will also keep his promise to support the company’s restructuring with investments of up to 200 million euros,” says a press release.

This might look familiar to people who have already been allowed to observe the protective shield procedure 2020. Even then, the creditors waived 2.2 billion euros, and even then Benko promised to invest millions. The actual money flows are difficult to understand. In addition, Corona intervened. However, individual branches have been modernised.

At the time, Galeria boss Miguel Müllenbach also promised to catapult the department store to the top of successful retail companies. It sounds similar today. As is well known, nothing came of it, and Müllenbach also has to resign now. Will there be another bankruptcy with a final spectacle in the Grugahalle soon? One can be curious.

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