Retail giant files for bankruptcy, Chinese companies in soup
June 18, 2009 - Germany
The German retail giant, Arcandor Group has formally filed for bankruptcy and reorganization on June 10. This has affected more than 10 textile and garment enterprises in Dalian city and the amount involved is over US $4 million.
The Arcandor Group, founded in 1881, had gradually established its leading position in world apparel industry since the last 128 years and had over 54,000 employees on its roles with sales reaching 20.47 billion euros in fiscal year of 2008.
Since the company had a long history and dominant position in apparel industry, Chinese enterprises did not hesitate to accept the harsh payment condition of 120 days after shipment as proposed by the group.
Before the financial crisis hit Europe, the group was already facing financial and operational problems. The Group had made an application for assistance before it filed for bankruptcy, but the Government did not accept the same.
The Group's bankruptcy is one of the largest events of bankruptcy. According to the Export Credit Insurance Corporation of China, the Group currently has given out orders totaling to more than US $20 million in China.
A conservative estimate shows that more than US $4 million of products have already been exported to the Group by Dalian enterprises. The largest outstanding amount is over US $1 million, and the smallest amount is US $100,000.
It is learned that four export enterprises had applied to the insurance company staking claim for around US $1.7 million. Chinese enterprises can obtain more than 80 percent compensation based on the contracts.