German retailers have been finding the going tough

Germany's largest retailer is heavily in debt and falling sales and profits have raised fears about its future.

The firm, which employs more than 100,000 staff, is planning to sell off many of its smaller department stores and specialist shops to raise funds.

The firm's shares rose 1% on the news that a loan deal had been agreed.

Key meeting

"Everything has been approved," Karstadt spokesman Joerg Howe told the Reuters news agency.

The firm - formed by a merger of retailer Karstadt and mail order firm Quelle - is expected to announce further details later on Friday.

The firm was under pressure to finalise the loan before an extraordinary general meeting on 22 November.

At the meeting, it will seek shareholder approval to raise 500m euros by issuing more than 90 million new shares.

Raising money

The company also hopes to raise 1.1bn euros by selling business units and 760m euros through job cuts.

Assets which could go under the hammer include 77 smaller department stores, 300 speciality retail stores and the retailer's logistics unit.

The company reached an agreement with unions last month to reduce its workforce by 5,500 jobs between 2005 and 2007.

Karstadt has been particularly affected by the downturn in German consumer spending since 90% of its sales come from its home market.

The firm's shares have fallen 25% since it announced a radical restructuring plan at the end of September.