Karstadt sale looks set to be derailed

German-Swedish financial investor Triton will pull out of its conditional bid for insolvent German retailer Karstadt unless Germany’s largest union Verdi agrees to make some changes to the insolvency agreement, Triton spokesman Max Hohenberg told PropertyEU.

‘We are not making any headway with Verdi yet,’ he said. ‘We want to renegotiate the insolvency tariff agreement between Arcandor and Verdi. If we can’t do this, we might have to pull out of the bid,’ he said.

Under the insolvency plan, Karstadt employees have agreed to a pay cut of 8% over three years, which would save EUR 150 mln over the time period, said Hohenberg. Under the existing agreement, this money is due to be repaid to employees in 2013, he said. Triton is requesting the payback period to be tied to turnover and revenue. ‘If the figures are good, employees could be paid back more quickly and even receive more than expected. If the figures are less good, we would like to cap it at 8%,’ he added.

In addition, Triton wants more flexibility with regard to setting rents and is currently talking to Highstreet on the rental side, Hohenberg added. Karstadt rents its stores in Germany, many of which are owned by the Highstreet consortium comprising Goldman Sachs' Whitehall Funds (51%), Deutsche Bank's RREEF funds (24%), Milan-based Pirelli Real Estate (12%), Generali (11%) and the Borletti Group. Together, they own a portfolio of 95 properties occupied by Karstadt including 45 Karstadt stores, as well as around 50 Karstadt car parks, offices and logistics properties throughout Germany.

Thomas Schultz, a spokesman for Karstadt administrator Klaus Hubert Görg, told PropertyEU that Triton remains their ‘preferred bidder’ but admitted that negotiations with Verdi were ‘challenging’. Nevertheless, Arcandor is hoping a deal will be closed before the end of the month, Schultz said. Hohenberg described such a timeline as ‘ambitious’.

However, in a sign that Arcandor is being forced to consider an alternative, a new interested party - widely believed to be Goldman Sachs - is preparing its first management meetings, according to someone close to the deal.



Last month, Triton is thought to have offered EUR30mln for Karstadt’s operational assets, as well as an additional EUR60 mln to restructure the German department-store chain. However, this is a far cry from estimates in March, which put Karstadt’s value at around EUR150mln.



In February, creditors of the landlords of Karstadt gave the green light for a landmark debt restructuring plan, paving the way for an eventual sale. Almost all of the noteholders in the EUR1.13 bn Fleet Street 2 Commercial Mortgage Backed Securitisation (CMBS) agreed to emergency measures to protect the value of their bonds in one of the largest CMBS restructurings of its kind.



Karstadt rival, Galeria Kaufhof, which is owned by German conglomerate Metro Group, is also up for sale. It was initially brought to market two years ago and then withdrawn when the financial crisis unfolded. Metro’s chief executive Eckhard Cordes said in March that he hopes to be able to sell Kaufhof by the end of the year, citing interest from private equity groups.