After the Galeria department store chain went bankrupt again, it was unclear for days whether employees could continue to be paid. Now it is clear: you will receive insolvency money from the Federal Employment Agency. It should be pre-financed through a bank so that it can be paid out quickly. Business operations are secured for the time being, but there are still restrictions for customers.
Can customers continue shopping at Galeria?
Yes, with restrictions. Operations in the 83 branches will continue for the time being. Vouchers are currently no longer accepted. Although vouchers do not automatically lose their monetary value as a result of insolvency proceedings, redemption can be refused as part of the proceedings.
Customers also cannot buy everything that is on the shelves. Some areas, such as clothing, are cordoned off with tape. “This brand is temporarily not for sale,” signs read. The goods in question still belong to the suppliers; Galeria only pays for them after the sale. Because of the bankruptcy, suppliers want to prevent their items from being sold without receiving money for them.
Why are employees now receiving insolvency benefits?
The Federal Employment Agency must determine the entitlement if all legal requirements are met. Approval for pre-financing is usually only granted if a significant proportion of the jobs are retained, for example through a viable continuation concept or serious buyers.
Insolvency experts were initially skeptical about Galeria's chances of receiving insolvency money. Accordingly, it should not actually be paid because the department store chain's payment problems from the bankruptcy in 2024 have not yet ended, as it was said.
This argument is probably decisive for the payment: Although this is the fourth insolvency application for Galeria since 2020, it is formally the first for the new legal entity. The business operations were transferred to a new company two years ago.
Galeria S.à r.l. & Co. KG filed for insolvency proceedings on October 2nd - not Galeria Karstadt Kaufhof GmbH, which filed for bankruptcy in 2024 and is still in plan monitoring. Therefore, insolvency money can be paid.
Who will receive insolvency money and until when?
The insolvency money was initially approved for the 9,650 employees of the department stores. Observers assume that even if the food departments and restaurants of the department stores file separate insolvency applications later, the around 1,600 people who work there will receive insolvency money. Galeria currently employs a total of 11,250 people.
According to reports, Galeria pays a total of almost 25 million euros per month. The insolvency benefit is financed through a levy from the employers. After the approval, Galeria announced: "The employees will therefore receive their wages and salaries for the months of October, November and December."
How important is the decision for Galeria?
Very important. "The approval of the employment agency to pay the insolvency money and pre-financing is an important prerequisite for securing the operational business for the coming months," explained the provisional insolvency administrator Frank Kebekus.
But it wasn't the only condition for things to continue. “Comprehensive agreements” have been reached with suppliers, financing partners and other parties “so that Galeria is operationally stable for the important Christmas business,” said Kebekus.
What do experts say about this?
Trade expert Boris Hedde from IFH Cologne sees the approval of insolvency money as good news for employees, but not for the future of the city center. "Especially against the background of the original goal of supporting the department store group to maintain inner-city locations, the question arises: Are repeated and cost-intensive support campaigns actually a sustainable therapy or ultimately just another Band-Aid?"
Jörg Funder from Worms University is also skeptical about a possible continuation. "What exactly should the future be? Same business model, just smaller?" Sustainable department store models required new solutions. Perhaps only in locations where the department store can also play a local supplier role, said Funder.
What's next?
The court had ordered preliminary insolvency proceedings. The provisional insolvency administrator Kebekus is now checking whether there are reasons for opening insolvency proceedings and whether the procedural costs are covered by the debtor's assets. It usually takes up to three months for the court to make a decision.
It is unclear whether and which locations will close. The decisive factor for Galeria's future will be whether Kebekus manages to find a new investor. In July, the company announced that it would review 33 department stores and close them if necessary. The decision was still pending at the end. People familiar with the situation can imagine that many more locations could be closed.
How did you file for bankruptcy?
Money had already become scarce in the spring. Landlords complained about missing rent payments. Management referred to liquidity fluctuations. It was only in June that the department store chain received new loan financing of up to 160 million euros. The credit line provided by the US investment company Gordon Brothers was linked to a restructuring plan that already envisaged further closures.
