GERMANY – KarstadtQuelle, Germany’s second-biggest retailer, has denied that it is tapping its own contractual trust arrangement (CTA) for €200m in capital to reduce long-term debt.
The Financial Times Deutschland reported that KarstadtQuelle would transfer real estate assets to its CTA as part of a complex transaction.
The FTD said from this move alone the retailer would raise €200m in capital, adding that this would help cut its long-term debt. The retailer’s debt totalled €3.9bn at the end of 2004.
But KarstadtQuelle flatly denied this. “The report is pure speculation and there are also a number of errors. We do have a new refinancing plan, but the details have not been released yet,” a spokesman for the retailer told IPE from Essen.
Created in 2002, KarstadtQuelle’s CTA finances €1.6bn in pension liabilities. To set up the vehicle, the retailer transferred €1.2bn worth of real estate holdings. The CTA’s other holdings are simply cash. It has no exposure to equities or bonds.
KarstadtQuelle, listed on Germany’s Dax-30 equity index, also has another €794m in German pension liabilities that it funds via book reserves, or Direktzusage in German.
The retailer has no current plans to outsource the remaining on-balance sheet liabilities. “We are currently comfortable with the (€794m) figure, so we see no reason to transfer them to the CTA right now,” the firm said.
Debt reduction is one of the key priorities of Thomas Middelhoff, who took over as chief executive of the battered retailer last spring. In 2004, KarstadtQuelle had a loss of €428m, though this includes extraordinary items. Its sales totalled €13.45bn.
Prior to this year’s restructuring, which has entailed closing shops, cutting staff and selling businesses, KarstadtQuelle had around 92,500 employees.