Another big business has filed for bankruptcy and this time, it isn't an American company but rather German-based Arcandor. The retailer filed last week
after requesting and being denied emergency funds of around 640 million euros (approximately $930 million US). It is being called one of the largest German bankruptcies ever. This move is also believed to be the largest test of the decade old German bankruptcy insolvency law.
The German retailer Arcandor
runs a mail-order program, Primondo
, in nearly 30 countries as well as 90 Karstadt Department Stores and three luxury stores across Germany. One of those stores, found in Berlin, is believed to be the largest department store on the continent. Arcandor also owns a majority of stock
in Thomas Cook, the holiday booking company that was said to be
"completely ring-fenced" and not affected by the announcement.
Talks of a possible buyout or merger
with the world's largest retail conglomerate, Metro, have been going on, with the interest being in about 60 of the 90 Karstadt locations. Groups in Italy and France have shown an interest in the luxury stores located in Hamburg, Berlin and Munich.
Following the initial filing on June 9 that requested protection for four "core units
," and about 43,000 employees, the retailer widened that number by adding 15 subsidiaries to the mix and an additional 6,700 employees who will be affected.
German Chancellor, Angela Merkel was the target of much criticism following her bailout approval of General Motors in Germany and took a gamble by leaving the huge corporation on it's own. The relief funds that were set aside earlier this year (about 115 billion euros) can only be used on corporations with 500 million euros or more a year in sales and can prove that the need was not linked to mismanagement. Arcandor had a history of problems and was denied relief based upon that history.
Ironically enough, Arcandor was run by the Director of the New York Times, Thomas Middlehoff, up until a year ago. Middlehoff is currently under investigation
for a possible breach of trust.