Berlin, June 30 - Shares in insolvent German retailer Arcandor jumped more than 11 percent on Tuesday after the government agreed to give state aid to Arcandor's stricken mail-order unit Quelle.
After a four-hour meeting on Monday, the federal government agreed to provide a loan guarantee of 50 million euros ($70 million) for Quelle together with two state governments until the end of this year.
Arcandor shares rose as much as 11.3 percent and were up 3.2 percent at 0.64 euros at 0748 GMT. The stock has lost about 16 percent in the past five trading days.
"The facility is needed to finish printing and mailing of this year's winter catalogue and this should be the collateral," said Heino Ruland, analyst at Ruland Research in a note.
"But the group is all but out of the woods," he added.
The future of Quelle had been in limbo for weeks as its request for state aid became a political football ahead of general elections in September.
Monday's decision, which needs European Commission approval, also marked a turning point after the government rejected Quelle parent Arcandor's calls for state aid this month, saying its owners had not pitched in enough money to mount a joint rescue for the group.
But German Economy Minister Karl-Theodor zu Guttenberg said on Tuesday Quelle was not home and dry. "Quelle is by no means saved yet, even if others are claiming that is the case," Guttenberg told German television.
"Quelle has got a chance, a fair chance, until December 31."
Quelle urgently needed the funds to get its mail order catalogue out to its customers, which was held up after its factoring bank cut Quelle off following Arcandor's insolvency.
A spokesman for Arcandor's insolvency administrator said on Monday he expected a decision by the European Commission on Quelle's state aid request as soon as Tuesday.