The way is clear for a new start for Galeria Karstadt Kaufhof (GKK). At a closed meeting in Essen on Tuesday afternoon, the creditors of the ailing department store chain approved the insolvency plan presented by insolvency administrator Stefan Denkhaus. The vote enables the takeover of 76 of the currently 92 department stores by a consortium of Mannheim entrepreneur Bernd Beetz and US investor Richard Baker. The only prerequisite for this: the approval of the Essen insolvency court, which is considered highly likely. The deal is to be completed at the end of July; the insolvency proceedings would then be over.
For the creditors, it was a choice between the proverbial plague and cholera. If they had not agreed to Denkhaus’ insolvency plan, this would have inevitably meant the break-up of the company. For the creditors, the agreement means that they – as in the previous two insolvency proceedings – will have to forego a lot of money. According to the confidential insolvency plan, from which the magazine Capital first quoted, the claims totaling 886 million euros are offset by cash on hand at the department store chain of 165.6 million euros. However, almost 87 million euros of this is for operating expenses, more than 40 million euros for legal costs and fees for the insolvency administrator, his team and external consultants, as well as a few smaller million-euro amounts. This includes around eight million euros for a transfer company for the 1,400 employees who will lose their jobs as a result of the 16 branch closures. The bottom line is that a total of 22.5 million euros remains in distribution for the creditors. Added to this are any payments that the insolvency administrator wants to claim from Galeria’s parent companies in the Austrian Signa Group.
The new owners do not pay a cent to Signa
Denkhaus assumes that creditors can ultimately expect an insolvency rate of 2.5 to 3 percent. The list of creditors includes the Federal Employment Agency (BA), but also the tax authorities and the landlords of the department store properties. The same goes for suppliers, although many claims are covered by trade credit insurance.
This is the third insolvency procedure in less than four years at Galeria, whose entrepreneurial roots go back to 1879. And creditors have lost billions in the course of these three proceedings. The current insolvency was triggered by the collapse of large parts of the Signa empire of the Austrian investor René Benko. When it became clear that the insolvent Signa parent companies would no longer be able to provide the promised financial injections, those responsible at Galeria had no choice but to go to the insolvency court at the end of January 2024. This was particularly bitter because the department store chain’s operational business had recently developed quite well.
Following the creditors’ decision on Tuesday, nothing seems to stand in the way of a takeover by investors Beetz and Baker, or rather their investment companies BB Kapital and NRDC Equity Partners. CapitalAccording to a report, they are not paying a cent to the previous owner Signa for Galeria Karstadt Kaufhof. After the takeover, they want to sort out the product range and expand the concession business, in which manufacturers and suppliers themselves control which of their products they offer in what quantities in the Galeria branches. However, they then also bear the business risk.
In addition, the new owners want to convert Galeria into a new legal form based in Luxembourg. Employee representatives are upset that Baker and Beetz want to abolish Galeria’s supervisory board. Trade unionists and works councils are generally concerned about co-determination in the department store and are also demanding a viable future concept. “Above all, sufficient investment is needed to secure the department store concept, locations and jobs in the long term,” Verdi negotiator Marcel Schäuble told the dpa news agency. “As the past has shown, branch closures and cost-cutting programs do not lead to a successful realignment.”
Retail experts also say that a lot of money has to be invested in the maintenance and modernization of individual Galeria branches. Under Benko, money flowed mainly into the large flagships in the metropolises, but in medium-sized and smaller stores there is sometimes a real investment backlog. The issue of digitization also needs to be pushed forward, they say. The new owners are said to have pledged 100 million euros as a boost. However, a Galeria expert estimates the relevant need to be “at least five times as much.”