Tuesday, Essen, Germany-based tourism and retail group Arcandor AG(ACAGF.PK)said it filed with the Essen District Court to commence insolvency proceedings, as its requests for state loan guarantees and rescue aid were rejected leaving the company with no further prospects for sustainable financing.
Along with Arcandor AG, its independent operating businesses, Karstadt Warenhaus GmbH, Primondo GmbH and Quelle GmbH, have also applied for protection of creditors.
However, Thomas Cook Group plc, the specialty mail order companies of the Primondo Group and the homeshopping channel HSE24 will remain unaffected by the insolvency proceedings.
The company said loans amounting to EUR 710 million will shortly become due, and the company will be threatened with insolvency as of 12 June 2009.
The insolvency proceedings are expected to affect a total of around 43 thousand employees of the Arcandor Group in Germany. However, the company added that employee salaries are secure for the months of June, July and August and they will be paid by the German Federal Employment Agency as part of the insolvency allowance.
Karl-Gerhard Eick, Chairman of the Arcandor AG Management Board, said, " Even as the insolvency proceedings are ongoing, we will continue to fight to save as many jobs and locations as possible and to offer a good future for our traditional, valuable German brands."
Though bankruptcy proceedings have been initiated, Arcandor stated that the operating companies will maintain all business activities in full. Supplier receivables for new goods deliveries will be served within the framework of the agreed payments terms as of today. All customer orders in mail order business will still be completed. Customer guarantees in place are still valid and will be met. Customers also still have a right to return goods. Any advance payments made by customers are still valid and will be deducted on final payment.
Arcandor said its main shareholders, Arcandor AG, Bankhaus Sal. Oppenheim and the Madeleine Schickedanz pool, are committed to the continuation of the company.
The Essen District Court is expected to decide on the further course of the insolvency opening proceedings and appoint an insolvency administrator.
ACAGF.PK closed trading on June 1 at $2.99.
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