* Insolvency administrator seeks money for staff
* Around 8,600 employees in 8 units affected by insolvency
* Rivals consider buying up stores (Adds appointment of administrator for Praktiker AG holding company)
FRANKFURT, July 12 (Reuters) - German home improvement retailer Praktiker will carry on trading from all its stores pending a review to see if it can be restructured, its insolvency administrator said on Friday.
Praktiker, Germany's third-biggest home improvement store chain and a household name in the country, filed for insolvency on Thursday after talks with creditors failed, triggering fears of heavy job losses.
Lawyer Christopher Seagon, appointed as insolvency administrator on Thursday, said he would apply for insolvency money from the federal government to pay the 8,600 staff that work for the eight units for which an insolvency application has been made.
"Stores will remain open, sales will continue with all employees as before," he said in a statement. Seagon will look at options for restructuring the chain over the coming weeks.
The group has been weighed down by growing debts. It most recently posted a year-on-year increase of more than a quarter to 535 million euros by the end of March. At the same time, its liquid funds shrank by almost 29 percent to 51.3 million euros.
Praktiker stores selling paints, tools and gardening products are a familiar sight in Germany's out-of-town shopping centres. But years of under-investment had left the stores looking tired and made them vulnerable to competition from rivals with more up-to-date shops and service.
With annual sales of about 3 billion euros, it ranks behind other home improvement chains OBI and Bauhaus and ahead of Hornbach.
The stores were famous for "20 percent off everything" discounts but these were bad for profits. And Praktiker's failure to invest in freshening up its stores and services has drawn comparisons with now-insolvent drugstore chain Schlecker.
"Praktiker was caught napping, just like Schlecker was at the time, and the insolvency is now the inevitable consequence," said Susanne Klaussener, chief executive of German real estate firm GRR Real Estate Management, which specialises in retail properties. GRR manages two Praktiker stores on behalf of property investors but does not own any directly.
"We were always very cautious when it came to Praktiker. The stores are outdated and some of them are just too small," she said.
Praktiker has a total 414 stores in nine countries. Its 99 international stores and 132 Max Bahr-branded outlets are excluded from the insolvency.
Separately on Friday, Praktiker said the parent company, Praktiker AG, had filed for insolvency in Saarbruecken and that Udo Groener has been named as insolvency administrator.
There is already speculation that Praktiker's outlets may be sold to rivals seeking market share in Europe's biggest economy, such as Kingfisher or Hagebau.
German daily Boersen-Zeitung said on Friday that Britain's Kingfisher, Europe's biggest do-it-yourself retailer, was interested in parts of Praktiker, without saying where it got the information.
Kingfisher, which is already present in the German home improvement market via a stake in Hornbach, declined to comment on Thursday whether it was interested in buying any of Praktiker's outlets.
It has previously said it was not interested in buying stores in Germany, but could be interested in stores in countries like France, Poland, Turkey and Romania.
Handelsblatt Online quoted the chief of smaller rival Hagebau as saying it could buy some Praktiker stores.
"We are interested in principle," Handelsblatt Online quoted Heribert Gondert as saying.
Industry leader OBI would also be interested in Praktiker's stores, though not a takeover of the group as a whole, parent company Tengelmann's chief Karl-Erivan Haub said on Thursday.
Praktiker's shares closed up 8.5 percent at 0.14 euros on Friday, after losing 65 percent of their value on Thursday.
The company was once worth almost 2 billion euros ($2.6 billion), but as its performance slipped in the economic downturn, its market capitalisation has shrunk to only about 15 million euros now. One of Praktiker's biggest creditors is Commerzbank.
$1 = 0.7668 euros Reporting by Maria Sheahan and Victoria Bryan; Additional reporting by Neil Maidment and Alexander Huebner; Editing by Mark Potter, Jane Merriman and Chris Reese