Image: (APA/HELMUT FOHRINGER)
In terms of liabilities, this is the highest level of debt in Austria’s economic history to date, ahead of Alpine construction (3.2 billion euros) and consumption (1.9 billion euros). According to Signa, the aim is an “orderly continuation of operational business operations and restructuring”. Rising interest rates and construction costs as well as falling real estate valuations triggered the bankruptcy.
“Despite considerable efforts in recent weeks, the necessary liquidity for an out-of-court restructuring could not be sufficiently secured,” Signa announced this morning. According to the information, the liabilities should be reorganized and the value of the investments preserved together with the insolvency administrator appointed by the court. According to well-informed circles, 42 employees in Austria are affected by the bankruptcy. Below the holding company based in Innsbruck and Vienna, there are 53 holdings of different sizes – media and retail holdings as well as real estate companies.
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The application for restructuring under self-administration indicates that Signa Holding believes that it has enough valuable assets and investments to be able to create a 30 percent payment quota for the creditors. However, the insolvency proceedings had not yet been opened by the commercial court as of Wednesday afternoon. It is therefore still unclear who will be appointed as liquidator.
42 employees and 273 creditors affected
According to AKV, 42 employees and 273 creditors are affected. The total liabilities are therefore 5 billion euros. According to the application, the debtor has assets with a book value of around 2.77 billion euros. However, the so-called liquidation value is only estimated at around 314 million. Christof Stapf was appointed as trustee. Michael Neuhauser is his deputy. According to the commercial court, daily statutes will be published with an edict and will be available from tomorrow, Thursday, at www.ediktsfile.justiz.gv.at.
The increase in interest rates hits Benko twice because he financed most of the real estate with loans. According to a study by the investment bank JPMorgan cited by “Reuters”, the debts in the two largest – not yet insolvent – real estate subsidiaries Signa Prime Selection and Signa Development Selection alone totaled 13 billion euros at the end of 2022. Of this, 7.7 billion euros were loans, a good half of which were taken out at variable interest rates.
According to an insider, a subsidiary of the insolvent Signa Holding, Signa Prime, is trying to “secure urgently needed liquid funds” in discussions with investors. But it remains unclear whether this will succeed, a person familiar with the process said on Wednesday, according to “Reuters”. If it fails, Prime could also file for bankruptcy. Real estate packages from Signa Holding are bundled at Prime.
According to insiders, the more than 100 banks that lent money to Benko, according to “Reuters”, had agreed on a standstill agreement, according to which they would not make interest or repayments due until further notice. In the course of insolvency, you are threatened with severe losses – depending on whether and with what your loans are secured.
Building stocks worth billions
Signa includes building assets worth billions – including the Tyrol department store in Innsbruck, properties in downtown Vienna such as the “Golden Quarter” including the Hotel Park Hyatt (ex-Ländebank headquarters), the Bank Austria Kunstforum Wien and those by the Art Nouveau architect Otto Wagner designed the Austrian Postal Savings Bank and abroad, for example, the Deutsche Börse building in Eschborn, the Hotel Bauer Palazzo in Venice, a half share in the Chrysler Building in New York, the luxury department store Selfridges in London and the Globus department store in Switzerland and the Elbtower in Hamburg, where construction work recently had to be stopped because, according to the construction company, Signa did not pay on time.
There was also a construction halt recently at the Alte Akademie in Munich’s prime location – the mayor there immediately put all Signa projects and plans in the city on hold. There are also idle construction sites on a number of large construction projects in Berlin and Düsseldorf.
What’s next with the major Lamarr construction site?
It is unclear what will happen next with the large Lamarr construction site on Mariahilfer Straße in Vienna. The luxury department store should open in 2025, the reinforced concrete frame is in place. “The Habau Group has completed the construction work to 99 percent – further steps are currently being evaluated,” said the company commissioned with the shell construction on Wednesday in response to an APA request.
Signa Holding justified the move to bankruptcy court today by saying that the group’s retail division, and especially stationary retail, had come under severe pressure. The group had, among other things, taken over the German Galeria Karstadt Kaufhof. Signa’s investments in this area did not bring the expected success. In the real estate sector, “external factors” have recently had a negative impact on business development. Despite considerable efforts, the company said it was unable to secure the necessary liquidity that would have been needed for an out-of-court restructuring.
Signa needs 500 million euros in the short term
According to media reports, in the short term the entire Signa Group needs around 500 million euros to cover the ongoing costs of wages and salaries or the ongoing construction sites, said an insider. A further 1.5 billion euros will be needed by the middle of next year. At the end of November, i.e. this week, a 200 million euro bond from Signa Prime is due.
The entire Signa Group has outstanding debts worth billions at banks – in Austria alone there are reportedly around 2.2 billion, most of it at the Unicredit subsidiary Bank Austria and in the Raiffeisen sector. According to the daily newspaper “Der Standard”, Raiffeisen Bank International’s (RBI) Signa commitment is said to be around 750 million euros. At the recently held extraordinary general meeting, RBI estimated its largest commitment in the real estate sector at 755 million euros. In addition, according to the newspaper report, the Raiffeisen-Landesbank Niederösterreich Wien is also likely to be involved with Signa with 280 million euros and the Raiffeisen Landesbank Oberösterreich with 150 million euros.
“No influence on financial market stability”
The newspaper gives a total Signa exposure of 600 million euros for Bank Austria, and 40 to 50 million euros for Erste Group. Hypo Vorarlberg, which is majority owned by the state of Vorarlberg, is also likely to have a larger volume outstanding from Signa, at 200 million euros. In financial circles, the figures reported were considered plausible.
The financial sector has recently calmed down regarding Signa. The deputy governor of the National Bank (OeNB), Gottfried Haber, recently said at a press conference that possible bankruptcies within the Signa Group would have “no significant impact on financial market stability or on individual institutions.” OeNB Governor Robert Holzmann also recently said that he considers the Austrian banks’ exposure to the ailing Signa Group to be “digestible”.
Criminal charges against Benko?
According to a report in the German magazine “Der Spiegel,” Signa investors and shareholders are now considering filing criminal charges against Benko. Those shareholders who recently purchased properties from Benko are also threatened with trouble. It was “incomprehensible what happened,” said one investor. One sees “signs of a delay in insolvency” because the problems had already become apparent in the summer. There was no comment from Benko to the news magazine. If, as a result of the holding company’s insolvency, the real estate subsidiaries Signa Prime and Signa Development also slide into insolvency and with them subcompanies with which sales deals were concluded, insolvency administrators could possibly reverse such sales. “The buyers then lose their money, but they have to give the properties back,” says those close to Benko. Like other creditors, they would then have to repeat their money from the insolvency estate.
In this context, “Der Spiegel” refers to the billion-dollar German freight forwarder Klaus-Michael Kühne, who bought the Berlin high-rise project BEAM from Signa Development. The RAG Foundation, which is supposed to take care of the German coal mining industry and, like Kühne, is a partner in Signa Prime, has just taken over a quarter of the magnificent “Goldenes Quartier” shopping mile in downtown Vienna from a Prime subsidiary.
Will there be further bankruptcies?
The cracks in the Benko empire recently became clearly visible: The New York-listed online sporting goods retailer Signa Sports United became insolvent in October after Signa refused to give it a capital injection of 150 million euros. The German sports retailer Sport-Scheck was sold to the British competitor Frasers, while shares in the luxury department store chain Selfridges went to the Thai co-owner Central Group. Last Friday, the German subsidiary Signa Real Estate Management Germany filed for bankruptcy at the Charlottenburg district court in Berlin. Insiders assume that further insolvencies of Signa companies will follow.
From the KSV’s perspective, the Signa Group has “lost massive amounts of trust in recent months due to very limited external communication”. Given the large number of direct and indirect investments in several countries, the insolvency administrator faces “a herculean task”.
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