Reuters: Hot Stocks: UPDATE 1-Praktiker prospects hit by Max Bahr insolvency move

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UPDATE 1-Praktiker prospects hit by Max Bahr insolvency move Jul 26th 2013, 13:50 Fri Jul 26, 2013 9:50am EDT * Praktiker planned to operate stores under Max Bahr brand * Move comes after credit insurer pulls coverage for unit * Praktiker had net debt of 535 mln eur at end-March * Bondholders still working on rescue plan * Shares fall sharply, lag German small cap SDAX (Adds name of credit insurer, bondholder reaction, insolvency administrator quote) FRANKFURT, July 26 (Reuters) - A rescue plan for Germany's Praktiker was thrown into doubt on Friday after the home improvement retailer said it would be filing for insolvency for its Max Bahr unit, upon which it had been pinning its hopes. Praktiker had earlier this month filed for insolvency for the Praktiker Holding company and operating units but its more successful Max Bahr chain and its international business had been spared. Praktiker said late on Thursday however, that a trade credit insurer, named by unions as Coface, had withdrawn coverage for Max Bahr's suppliers - meaning that a supply of goods to its stores could not be guaranteed - and so it would also shortly file for insolvency for that chain. Coface declined to comment specifically on Max Bahr and Praktiker. "But we do not see ourselves as the trigger for any insolvency," a spokesman said. The planned insolvency of Max Bahr with its 132 stores, will make the search for investors for the Praktiker group, which has around 20,000 full and part-time employees, much harder. Holders of 250 million euros ($331 million) of bonds had last week put forward a restructuring plan that would have seen them convert the debt into Praktiker shares and continue operating Praktiker with around 200 stores, but under the Max Bahr brand. "This means the chances for our plan have become very slim. but we will try to get a group of investors together," Ingo Scholz, who represents the bondholders, said on Friday. Praktiker, whose blue and yellow-branded stores selling paints, tools and gardening products are a familiar sight in Germany's out-of-town shopping centres, has been grappling with a decline in sales and profitability since it ended a "20 percent off everything" discount strategy. It had been in the process of converting many of its Praktiker-branded stores to the Max Bahr brand, which traditionally had better profit margins. The insolvency administrator for the Praktiker holding company, Udo Groener, admitted the prospects for shareholders and creditors had dimmed, but said there were positives, such as making it easier to break off unfavourable contracts. "It's getting yet more complicated," said a banking source. The administrator expects to appoint an investment bank next week to find buyers for the whole business. DEMISE Praktiker has been weighed down by growing debts. It most recently posted a year-on-year increase in net debt 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 Along with the discount strategy, which meant customers only came to buy products when they knew the offer was on, Praktiker also suffered from having too small stores that did not entice shoppers. The failure to invest in freshening up its stores has drawn comparisons with the demise of drugstore chain Schlecker. Things came to a head after a poor start to 2013, when retailers were hit by the bad weather. The Praktiker group saw first-quarter like-for-like sales decline 8.8 percent and operating losses widened 55 percent to 91.7 million euros. Max Bahr, which offers a higher proportion of gardening products, saw like-for-like sales fall 11.4 percent. Trade union Verdi said on Friday it was a "scandal" that credit insurer Coface had withdrawn coverage and said the group must not be broken up. "Those that have done good business with Praktiker and Max Bahr for years must now play an active role in helping to give the companies and their employees a future," Verdi executive board member Stefanie Nutzenberger said. Praktiker's shares, which once traded at over 32 euros back in 2007, were down 7.75 percent at 0.119 euros at 1326 GMT. ($1=0.7555 euros) (Reporting by Alexander Huebner and Victoria Bryan; Editing by Greg Mahlich and Elaine Hardcastle) Link this Share this Digg this Email Reprints

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