Austrian drug store chain Dayli filed for court-supervised restructuring on Thursday, acknowledging it had failed to deliver on its concept for neighborhood stores and saying nearly 3,500 jobs were at risk.
The filing in Linz poses a fresh test of whether Austria's strong safety net that gives it the European Union's lowest jobless rate can handle a wave of corporate failures, including that of Alpine, the country's second-biggest construction group.
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Investor Rudolf Haberleitner launched Dayli a year ago from the Austrian remnants of Germany's failed Schlecker group, but had to throw in the towel and let an administrator take over.
The company said it had 49 million euros ($63.6 million) more liabilities than assets based on break-up valuations.
It proposed paying creditors 25 percent of their claims.
Just before the filing, Haberleitner's investment vehicle transferred its stake in Dayli to a company led by retail sector veteran Martin Zieger.
"The goal is to secure the financing of the company and to secure as many jobs and neighborhood shops as possible in Austria in cooperation with government and unions," Zieger said in a statement.
Dayli's woes have made headlines for weeks, unsettling creditors and suppliers.
Austrian papers reported this week that Haberleitner, desperately searching for allies, was cheated out of 1 million euros in cash that a supposed Italian investor had demanded as a fee, only to grab the money and run from a hotel bar in Udine.
In an interview with Austrian radio, Haberleitner rejected suggestions he was leaving because of the reputational damage that had caused but said he could not comment further because a police investigation to find a fraudster was under way.
He acknowledged he had made mistakes but said inability to line up finance and run-ins with labor were primarily to blame for the company's woes. He said no big changes to its network or staff were planned should the reorganization go through.
Dayli's problems follow the insolvency of Alpine, the unit of Spanish group FCC that is being broken up and sold off in pieces after a bold foreign expansion campaign went awry.
(Reporting by Michael Shields; Editing by Elaine Hardcastle and Mark Potter)