The creditors are paving the way for the restructuring of the Galeria department store company. What happens next? At least one important question remains unanswered.
Galeria Karstadt Kaufhof has overcome the last major hurdle to its rescue. The creditors’ meeting approved the plan to restructure the ailing department store chain on Tuesday at the Essen trade fair, as insolvency administrator Stefan Denkhaus announced.
Formally, the insolvency proceedings are now about to be concluded. After the deadline for filing an objection has expired, the responsible district court in Essen can lift the proceedings in June. Then the way will finally be clear for the retail giant to be restructured and taken over by the new owners: the US investment company NRDC and the holding company of the entrepreneur Bernd Beetz, who was CEO of the cosmetics group Coty until 2012. Denkhaus plans to hand over to them in July.
Galeria branches are closing across Germany
The employees already have a lot of clarity. The trembling after the third bankruptcy in less than four years is over for now. Contrary to what some retail experts had predicted, Galeria is continuing. Nevertheless, the company and employees are once again paying a high price. Branches are closing again across Germany, and 1,400 people are losing their jobs.
The Verdi union put up a symbolic wooden cross for each locksmith branch in front of the exhibition building. “Mr. Beetz, invest in the team,” reads one of the posters. Another reads: “Benko, thanks for nothing!” The cuts at Galeria are not nearly as severe as expected. Experts had predicted in January that at most 20 to 30 locations would remain. Many expressed doubts that anyone would be interested at all.
Creditors again forego a lot of money
Around 120 people, representing around 4,600 creditors, attended the non-public event in Essen on Tuesday. They will have to forego a lot of money again if the insolvency plan is accepted. In recent weeks, landlords, suppliers and other creditors such as the federal government have filed claims totaling 886.1 million euros. It is expected that only up to 22.5 million euros – that is 2.5 to 3 percent – will be returned to them. Payments from claims against the previous owner, the Signa Group of entrepreneur René Benko, could increase the rate even further. Because the financially troubled parent company failed to provide promised aid, Galeria slipped into insolvency again at the beginning of the year.
The Economic Stabilization Fund (WSF) will receive more money back. The state stabilization fund had given Galeria a helping hand with 680 million euros in 2021 and 2022. A large part of the claims had been lost in the course of the insolvency proceedings concluded in 2023. A so-called subordinated loan of 88 million euros was continued. Because new collateral was agreed for this in the event of a default, the WSF has “priority separation rights” from the insolvency estate. The responsible financial agency expects that the claims will now be met in full. No further defaults are to be expected in the course of the new insolvency.
Karstadt and Kaufhof disappear from the name
The insolvency administrator has laid the foundation for the new beginning. Denkhaus’ main goal was to make the group more of a medium-sized company. The company headquarters in Essen will be closed. In 2025, the administration will move into a branch in Düsseldorf – significantly streamlined. Of the 92 branches, 76 will remain. This will reportedly reduce the rental burden by around 80 million euros per year. The name will also change. In future, the department store chain will only be called Galeria, and the large, traditional brands Karstadt and Kaufhof will disappear. They are too closely linked to the recent bankruptcies, it is said.
And yet doubts and uncertainty have not disappeared even with the creditors’ yes. This is also because many important questions remain unanswered. How can Galeria get back on the road to success? How can it hold its own against retail giants like Amazon and new portals like Shein and Temu? And how can the department store company be prevented from getting into trouble again in 2025?
Beauty products, handbags, shoes and underwear are to be the focus of the range. Galeria boss Olivier Van den Bossche recently announced this. Not much more is known about the future direction. The new owners have so far remained tight-lipped publicly. They said they wanted to wait until the process was completed. However, Beetz has recently been heavily involved in the background. For example, he campaigned for the Galeria branch in Mannheim, which is on the closure list, to remain open. Beetz has close ties to the city; he grew up in Mannheim and is president of the local third division football club SV Waldhof. It is not yet clear whether this location and others will be removed from the cut list.
insolvency
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Expert: “New owners must show that they are serious”
What will be decisive is what Beetz and the investment company NRDC, headed by former Kaufhof owner Richard Baker and his son Jack, put into the department store chain. The insolvency plan states that they have pledged “extensive financial resources” for restructuring and reorientation, but not how much. “The new owners still have to show that they are serious. That is not clear from the insolvency plan,” said insolvency expert Manfred Hunkemöller.
Up to 100 million euros are expected to flow in the next two to three years, according to sources close to the investors. Whether that is enough is at least questionable. Trade experts estimate that Galeria will need to invest more than a billion euros.
There is still much that is unclear about the future of the department store company. However, one thing has been certain since that day: Galeria will be given another chance.
Source: Stern
