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May 27, 2009
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Berlin to decide on Arcandor's aid request soon

By
Reuters
Published
May 27, 2009

BERLIN/FRANKFURT, May 27 (Reuters) - The German government is keeping an open mind about granting aid to stricken retail and tourism group Arcandor (AROG.DE) and will decide soon what to do, Economy Minister Karl-Theodor zu Guttenberg said.



Arcandor, which has long struggled to break even, has been dragged deeper into crisis by the global recession, prompting its chief executive to warn that it could go bust within weeks if it did not get more than $1 billion in state aid.

Guttenberg told about 5,000 Arcandor employees demonstrating in Berlin to support their company's call for help that the government would review Arcandor's request without prejudice.

Politicians from ruling parties have criticised the request for support, saying the group's problems emerged before the financial crisis due to management mistakes in the past.

Arcandor is running out of time. It is in talks with banks to renew credit lines worth up to 710 million euros ($990 million) by June 12 and another 250 million euros by the end of September for which it needs the government's backing.

Because of the ongoing talks, Arcandor pushed back its first-half earnings report a second time on Wednesday 27 May and now plans to report on June 18 instead of on Friday 29 May.

The company is also in talks with the owners of its department store properties to negotiate lower rent, two sources close the matter told Reuters. The negotiations were going very well, the sources said, and could result in a deferral or a temporary cut in rent.

The talks are part of Arcandor Chief Executive Karl-Gerhard Eick's five-year turnaround plan, which will see Arcandor move downmarket and hive off loss-making businesses.

Market players took heart from the prospect of lower rent costs, traders said. Arcandor shares were up 8.6 percent at 1.89 euros at 1339 GMT, having fallen about 23 percent in the past five trading days.

For more on companies seeking aid please double click on ))

(Reporting by Eva Kuehnen, Philipp Halstrick, Markus Wacket in Berlin and Nikola Rotscheroth in Duesseldorf)

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