By  on June 8, 2009

BERLIN — The outlook has severely darkened for the embattled Arcandor Group. On Monday, the German government first turned down the department store, catalogue and travel group’s request of federal loan guarantees of 650 million euros, or $897 million at current exchange, and later an emergency loan of 437 million euros, or $603.1 million, from the government-owned KfW bank.

Arcandor needs to roll over a 650 million euro loan by Friday to remain solvent. Fears the group is on the brink of bankruptcy sent its stock plunging 43.6 percent on Monday to 1.06 euros, or $1.46, a new 52-week low.

Leading politicians, including chancellor Angela Merkel, have said Arcandor’s main banks (Bayern LB, Commerzbank and the Royal Bank of Scotland); major shareholders (the private bank Sal. Oppenheim with a 28.6 percent stake, and Madeleine Schickedanz, with 26.7percent), and Karstadt department store landlord the Highstreet consortium (which includes Goldman Sachs, Deutsche Bank, Perelli Re, Generali Real Estate and Borletti) must do more to solve Arcandor’s problems. The retailer’s difficulties, both German and European Union officials contend, predate the financial crisis and therefore preclude federal aid.

On Monday evening, Arcandor said it would again meet with the main parties by midday today to gain further concessions and keep the possibility open for a new KfW credit application. Sal. Oppenheim and Schickedanz have said they would participate in a 150 million euro, or $207 million, capital increase, and media reports Monday suggested Arcandor was now seeking a six-month moratorium from its banks on debt repayment, as well as renegotiated interest rates and new loans. Reports also indicate Arcandor has not paid rent to Highstreet on its Karstadt doors for the month of June.

Talks with the rival Metro Group on a possible fusion of Arcandor’s Karstadt and Metro’s Galeria Kaufhof department stores have made little progress. A meeting Sunday with both groups’ chief executive officers as well as representatives from Sal. Oppenheim and Highstreet ended with no results. The German government had made merger talks a prerequisite for any type of federal assistance.

Arcandor said talks with Metro will be resumed in the very near future. Last week, Metro stated 60 of the 90 Karstadt department store doors could easily be integrated into the Galeria Kaufhof chain. There are also 28 Karstadt Sport stores which have not been part of the merger talks, but the Hamburg-based catalogue group Otto has signalled interest in some of those properties. Various other groups have also shown interest in the remaining Arcandor Group catalogue and travel businesses.

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