IF YOU WANTED PROOF THAT THINGS ARE GETTING UGLY:

El Corte Ingles SA hired Morgan Stanley (MS) to help reorganize about 5 billion euros ($6.4 billion) of debt owed by Europe’s largest department store chain, according to three people familiar with the matter.

The retailer is renegotiating terms of its borrowings with lenders including Banco Santander SA (SAN), said the people, who declined to be identified before the deal is complete. The Madrid-based company wants to relax covenants governing terms of the debt, including an extension of maturity, said the people.

El Corte Ingles is grappling with a collapse in consumer confidence after Spain’s unemployment rate surged to 27.2 percent in the first quarter, the highest in at least 37 years. Efforts to tackle the European Union’s biggest budget deficit crimped economic growth, with retail sales falling almost 11 percent in March compared with a year earlier.