June 7, 2009 / 12:48 PM / in 8 years

UPDATE 2-Arcandor could file for insolvency on Monday

* Arcandor sees insolvency if Berlin turns down loan request

* Gov’t committee expected to discuss request on Monday

* Arcandor, Metro CEOs agree to enter concrete store talks

* Metro CEO proposes to Berlin four-step merger plan-paper (Adds Arcandor, Metro comments)

By Nikola Rotscheroth

DUESSELDORF, Germany, June 7 (Reuters) - German retailer Arcandor AG (AROG.DE) will have to file for insolvency on Monday if the German government turns down its request for state aid, a spokesman for the company said on Sunday.

“If we unexpectedly do not find a solution, which would need to include government support, then we would know on Monday that we would be unable to pay on Friday, and then we would have to file for insolvency on Monday,” said spokesman Gerd Koslowski.

A government committee is due to meet on Monday to discuss Arcandor’s request for a 437 million euro ($619 million) loan from state development bank KfW [KFW.UL]. [ID:nL563051].

Berlin has pushed Arcandor to consider a deal with rival Metro AG MEOG.DE, which has proposed to merge its department store chain with Arcandor‘s.

Arcandor’s Chief Executive Karl-Gerhard Eick, Chairman Friedrich Carl Janssen, Metro’s CEO Eckhard Cordes and Goldman Sachs’s (GS.N) German head Alexander Dibelius met on Sunday to discuss a possible rescue for the German retailer.

The participants agreed to enter concrete talks next week to create a new department store company, for which all sides were willing to make substantial contributions, Arcandor and Metro said on Sunday after the talks ended.

“The ongoing negotiations for a German Department Store Inc fulfill one of the government’s conditions to grant Arcandor’s requested state loan,” Arcandor CEO Eick said in a statement.

Arcandor said it expects the government to decide on its call for aid on Monday.

FOUR-STEP PLAN

Most of the real estate used by Arcandor is owned by the Highstreet consortium that is led by Goldman Sachs, Deutsche Bank (DBKGn.DE) and Pirelli Real Estate. A German paper has said Arcandor has stopped paying rent for its stores. [ID:nL6201923]

Metro CEO Cordes told German weekly Bild am Sonntag he had proposed to the German government a four-step plan for Arcandor.

He called for a clear commitment by all parties to negotiate and for the establishment of a “data room” for Arcandor’s department stores where Metro could see its books.

This would be followed by an analysis of which of the Karstadt stores are economically viable and negotiations with landlords over their possible contributions to a rescue.

“After a data room has been set up we could -- if everyone is on board -- reach a solution for the rescue of the Karstadt stores and the setup of a Warenhaus AG (department store alliance) within about two months,” Cordes told the paper.

To give Arcandor some breathing space but keep pressure on all parties, Cordes said the government could grant an emergency bridge loan to keep the company afloat.

German Vice-Chancellor Frank-Walter Steinmeier said the government’s role in a rescue would depend on what Arcandor’s owners and landlords were willing to contribute.

“We are fighting for a solution,” said Steinmeier, a member of the centre-left Social Democrats (SPD) who will challenge Chancellor Angela Merkel in a September election.

Metro has so far said it opposes outright state aid for its rival as it would distort competition and has pushed for a quick agreement on a department store alliance instead. (Additional reporting by Madeline Chambers and Eva Kuehnen; Writing by Maria Sheahan; Editing by David Holmes and Diane Craft

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