Ceconomy Seeks $2.2 Billion German Aid Amid Virus Slump

(Bloomberg) --

German electronics retailer Ceconomy AG is in talks to secure about 2 billion euros ($2.2 billion) in government aid after the coronavirus pandemic forced the closing of its stores, according to people familiar with the matter. The shares fell as much as 9.2%.

The company is in negotiations with Germany’s state-owned KfW development bank and its commercial lenders about a financing package, said the people, who asked not to be identified because the talks are private.

Under one potential scenario, KfW could provide about 80% or more of the loans, with commercial banks shouldering the rest as part of the state bank’s special program, said the people. Ceconomy may only need to tap part of the credit line, one of them said.

Negotiations are ongoing and the exact structure and timing haven’t been finalized, the people said.

“We’re taking all measures necessary to protect our business and mitigate the developments related to Covid-19,” Ceconomy said in a statement. Since it’s not clear when the company may be able to re-open its stores, “we have decided to additionally apply for KfW financing” as well as cutting costs and making other changes, the company said. A spokesman for KfW declined to comment.

Shares of Ceconomy, which controls the Media Markt and Saturn chains, have fallen by about two thirds since the start of the year as the pandemic routed global markets, cutting the company’s market value to about 675 million euros. They were down 5.3% at 1.20 p.m. in Frankfurt.

A deal with Ceconomy would mark the second large rescue loan by Germany’s KfW, which activated its lifeline loan program earlier this month to bolster domestic businesses. The bank provided tour operator TUI AG with a 1.8 billion-euro bridge loan on Friday.

Germany earlier this month signed off on taking on 156 billion euros of new debt as part of an unprecedented package to cushion economic fallout from the virus. It has also agreed to set up a 600 billion-euro fund to provide companies with loans and guarantees as well as buy stakes in stricken businesses.

Ceconomy on March 18 withdrew its full-year outlook even after a “solid” January and February because the virus outbreak led to the closing of stores throughout Europe, including in Germany, Switzerland, Italy and Spain.

The company also had to postpone its capital-markets day slated for March 26, where Chief Executive Officer Bernhard Duettmann had planned to present his strategy for the retailer that is squeezed by online rivals such as Amazon.com.

Duettmann had served as interim leader before as the company separated from food wholesaler Metro AG in 2017 and struggled to retain a permanent leader. He already scrapped the dividend for a second year to preserve cash amid the turnaround plan.

The company had neglected online sales for years, and while recent investments to lure more customers via the internet bore fruit, it still sold goods worth less than 3 billion euros, or less than 14% of total sales, online.

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