German department store chain reaches rescue milestone

Retailer Galeria Karstadt Kaufhof has once more been rescued from the brink of insolvency after facing its third bankruptcy in less than four years.

Galeria's creditors have voted in favour of restructuring measures, which insolvency administrator Stefan Denkhaus branded as the only means to avoid a break up.

The path is now clear for a consortium takeover in July, involving US private equity firm NRDC and BB Kapital SA, a company owned by German entrepreneur Bernd Beetz.

The latest rescue attempt comes at a high price as the number of store locations are set to be reduced and staff levels cut.

Under the current plan, 16 out of 92 existing department stores will close, and 1,400 of Galeria's current 12,800 employees will be laid off.

The cuts are, however, less drastic than previously thought, with some commentators predicting in January that a maximum of 20 to 30 stores would remain.

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Around 120 people attended the non-public event in the German city of Essen on Tuesday where the insolvency plan was discussed.

Creditors, including landlords, suppliers, and the federal government, have come forward in recent weeks with debts owed to them by Galeria.

The filed claims amount to €886.1 million, although it is expected that only €22.5 million will actually be paid back.

Moving forward, Galeria is also planning to streamline its offices and reduce its rental costs, closing 76 of 92 branches.

It is understood that the addition "Karstadt Kaufhof" will be removed from the company name.