UPDATE 1-Germany puts loan conditions on helping Quelle

(Adds share price, background)

By Matthias Inverardi

COLOGNE, Germany, June 26 (Reuters) - German Finance Minister Peer Steinbrueck would be ready to help the Quelle mail order unit of struggling retailer Arcandor (AROG.DE) provided certain conditions are met, he said on Friday.

Firstly, the securities put up against a loan to Quelle would have to be higher than the amount of money lent, Steinbrueck said in the western city of Cologne.

Secondly, state-owned bank KfW would have to be secured ahead of all other creditors against potential default.

"The security has to have a higher value than the loan," Steinbrueck said. "Otherwise, I'm not willing to embark upon any adventures that could cost taxpayers."

Arcandor shares were trading down 3.1 percent by 1115 GMT in a firmer market.

Germany has been discussing whether to back a loan of around 50 million euros ($70 million) to keep Quelle alive after parent company Arcandor filed for bankruptcy. Hopes for a deal have been repeatedly raised in recent days only to fade.

Economy Minister Karl-Theodor zu Guttenberg has said the government wants additional assurances before giving its support to a special state-backed loan for Arcandor's (AROG.DE) mail order unit Quelle.

The federal government rejected Quelle's original request for help on Monday, but the company has submitted a revised plan which it hopes the government will back.

Quelle, which comprises the biggest part of Arcandor's Primondo mail-order business, traces its roots to wholeseller Gustav Schickedanz who sought from 1927 to circumvent the middleman by selling his goods directly to consumers.

The company has been hit by weak demand in Germany in recent years as it struggles to catch up with consumers' rapid shift from flipping through paper catalogues to ordering goods on the Internet. (Writing by Dave Graham and Erik Kirschbaum; Editing by David Holmes)