A majority of the creditors of Garant Schuh + Mode endorsed the proposals made at a previously scheduled meeting last Tuesday by the company’s court-appointed administrator, Friedrich W. Metzeler, to take it out of the insolvency proceedings that began on Dec. 1, 2004. A few formalities are still required to complete the process, most likely by the end of this year, paving the way for a possible takeover by a new investor.

Garant’s creditors agreed to waive 61.6 percent of their debt claims, totaling €127 million. In other words they will get back 38.4 percent of the money owed to them, although only 14.7 percent will be paid to them up front. The alternative would have been to liquidate the company, but in this case they would have recovered only 7.3 percent of the outstanding liabilities.

The creditors’ remaining entitlement to 23.7 percent will be funded from various transactions that will take an indefinite time to be completed. They include the premium that will be paid by the new investor for Garant’s share over the initial flotation price on the Frankfurt stock exchange as well as the proceeds from claims pending against certain directors of the company and other injuring parties.

Additional funds will come from a planned recapitalization of the company that will raise its equity to about €23.1 million and from the resale of Garant’s 42.79 percent stake in NordFinanz Bank, a bank in which it had an option to acquire instead all its shares. Garant had originally acquired the shares to secure a method to avoid double payments of the suppliers’ bills, but the company has decided instead to solve this problem by using an external insurance firm.

The biggest creditors of Garant Schuh + Mode are ING Bank, Commerzbank, Dresdner Bank and various other German financial institutions. Suppliers and retailers formed a pool at the end of 2004 to defend their own claims in common. Garant has pointed out that its results are improving although nearly 1,500 shoe retailers have left the buying group since the insolvency began.