René Benko’s Signa property group files for insolvency

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Signa Holding, the central company in the sprawling European property empire of Austrian billionaire René Benko, has filed for insolvency proceedings in Vienna.

In a statement, the heavily indebted group said it had applied for self-administration — a concept in Austrian corporate law in which a company attempts to restructure itself, without handing full control of the process to an external administrator. 

“Despite considerable efforts in recent weeks, the necessary liquidity for an out-of-court restructuring process could not be sufficiently secured, and so Signa Holding has now applied for reorganisation proceedings,” Signa said on Wednesday. 

The filing will raise concerns for dozens of European banks, including Switzerland’s Julius Baer and Austria’s Raiffeisen, over their exposure to Signa and Benko, which has sent their shares down in recent days. 

Both banks declined to comment but have previously stressed that their lending to the group was well collateralised.

Julius Baer has outstanding debts of more than SFr600mn to Signa, and Raiffeisen Bank International more than €750mn, according to people familiar with the matter. Analysts at JPMorgan said Signa owed at least €13bn to lenders in a note last week.

Signa Holding’s administration will also send a shockwave across central Europe’s retail sector as it prepares for its most important month of the year: Signa is the majority owner of the region’s biggest department stores, including Germany’s Galeria Kaufhof and KaDeWe, and Switzerland’s Globus.

Altogether Signa says it has assets, which include luxury hotels and central city office buildings, worth €27bn, with a further €25bn of projects in its pipeline.

A sprawling network of about 1,000 separate corporate entities, with Signa Holding at its centre, it has been facing financial difficulties for more than a year, as its aggressive, debt-fuelled business model was hit by rising interest rates.

This year alone Signa was due to pay back €1.3bn to lenders, but has struggled to do so, leading to standstill agreements with banks and an increasingly desperate search for new capital, which saw Benko flying regularly to the Middle East and turning to hedge funds such as the US activist Elliott Management.

All declined to invest, however.

Benko’s existing co-investors, who are entangled in the group at many different levels and via different vehicles designed to allow Benko to maintain control, also refused to stump up more cash and forced a boardroom rebellion at the beginning of this month.

Those involved include some of the most prominent names in European business: France’s Peugeot family; Tetra Pak’s Rausings; logistics magnate Klaus-Michael Kühne; Roland Berger, founder of the eponymous international management consultancy; Swiss chocolate group Lindt & Sprüngli’s chair Ernst Tanner; Austrian industrialist Hans Peter Haselsteiner; and pet food tycoon Torsten Toeller. Even the heirs of Austrian formula 1 racing legend Niki Lauda own shares.

At their insistence, Arndt Geiwitz, a German insolvency expert, was brought in this month to take control and attempt a last-minute rescue deal to avoid administration.

Signa’s management now has little room for manoeuvre. Although it will lead the bankruptcy proceedings, under Austria’s self-administration regime an external administrator will supervise its actions, with a veto right over any transactions.

Signa has 90 days to present a plan to creditors, which they must accept in order to stop the company being tipped into full administration.