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Over twenty years, René Benko grew his Signa property empire from humble beginnings fixing up residences in his residence metropolis of Innsbruck to its apex as one in every of Europe’s most profitable property builders.
Fuelled with low-cost debt and utilizing an more and more baroque community of holding corporations, subsidiaries and trusts, Signa acquired a number of the most prestigious addresses throughout the continent, making Benko a billionaire. Solely the Pope and the British monarchy had higher buildings than him, he liked to joke.
Its complexity, nonetheless, has been a key aspect within the disaster that Signa now faces. Over the previous 12 months, buyers have balked at giving the group more cash, involved in regards to the elaborate monetary engineering Benko was utilizing. With out recent funds, insolvency turned inevitable.
The Monetary Instances has simplified the Signa Group’s construction of greater than 1000 company entities as an example the challenges now going through lenders and buyers. Signa didn’t reply to requests for remark.
Signa Holding
On Wednesday, Signa Holding, the central firm within the Signa community filed for insolvency within the Austrian courts.
Beneath “self-administration” guidelines in Austria, its administration — aided by German turnaround specialist Arndt Geiwitz — have 90 days to drag collectively a viable restructuring for approval by collectors. In the event that they fail, an unbiased administrator will take over.
Benko remains to be the controlling shareholder in Signa Holding. However there are outdoors buyers and billions of euros of debt. Balancing the pursuits of everybody concerned will likely be a fiendish process.
Advisers, buyers and lenders who’ve spoken to the Monetary Instances have all mentioned the identical factor: nobody appears to know precisely who has a declare to what. However in current months, one insider mentioned, cash had been flowing from all arms of the Signa empire again in direction of Signa Holding.
Signa Sports activities and Signa Actual Property Administration Germany
The monetary tremors started on the extremities.
The sports activities ecommerce platform Signa Sports activities United was listed on the New York Inventory Alternate in 2021 with a valuation of $3bn. After months of deteriorating funds, nonetheless, it declared itself bankrupt on October 23, days after Signa Holding withdrew a $150mn capital dedication.
The administration of the corporate — which Signa floated with backing from Japan’s SoftBank, Saudi Arabia’s Public Funding Fund and Abu Dhabi’s Mubadala — mentioned it might sue.
Then on Friday final week, the corporate answerable for overseeing the day-to-day administration of Signa’s German property tasks, Signa Actual Property Administration Germany, declared itself bancrupt too. The money from its Austrian mum or dad merely stopped flowing.
Signa Prime and Signa Growth
All eyes at the moment are on two corporations within the Signa community: Signa Prime and Signa Growth. The pair personal essentially the most invaluable property within the Signa portfolio.
Signa Growth’s remit is to purchase land and construct new workplace buildings or venues that it will probably rapidly promote. Its tasks embrace the BEAM and Look workplace websites in Berlin and the Twentytwo tower in Vienna.
The principle function of Signa Prime, in contrast, is to carry and develop top-tier properties for the long run, earning profits from their rental earnings and rising valuations. Its property are those who Benko is most pleased with: the KaDeWe constructing in Berlin and the “Golden Quarter” in Vienna, for instance. It additionally owns a number of building tasks, together with the Elbtower in Hamburg.
Each corporations are nonetheless buying and selling and each share the identical administration and supervisory boards.
Amongst these on the supervisory board are Robert Peugeot, of the eponymous vehicle dynasty; Alfred Gusenbauer, the previous chancellor of Austria; and Karl Sevelda, the previous chair of Raiffeisen Financial institution Worldwide, one in every of Signa’s largest lenders.
The properties
In all, Signa claims to have a portfolio of buildings price greater than €27bn and a pipeline of developments price €25bn, in response to displays it has given to buyers.
Benko’s mannequin — established along with his first large acquisition, the Kaufhaus Tyrol division retailer in Innsbruck — is to purchase unloved city-centre venues, knock them down or refurbish them, and switch them into temples for luxurious, bringing in big-name manufacturers and cranking up the properties’ valuations within the course of.
These valuations saved on rising in a client market fuelled by low-cost central financial institution cash. The debt wanted to finance such tasks was low-cost too. That meant Signa might quickly broaden. In 2019, the corporate recorded its biggest-ever revenue, with Signa Holding making greater than €1bn.
Up till final 12 months, Signa was nonetheless signing commitments for billions of euros price of latest developments.
Work on the biggest of these — the Elbtower, as a consequence of be Germany’s third-tallest skyscraper — halted in October when Signa stopped paying employees’ wages.
Signa’s bullish valuations hinged on the rental incomes its properties might command. The KaDeWe constructing in Berlin, for instance, appreciated on Signa’s books by greater than €100mn yearly for the previous 5 years.
That raised questions for some within the business as a result of lots of Signa’s most necessary tenants — those that paid the rents that justified the rising valuations — have been working corporations additionally managed by Signa.
KaDeWe Group
The KaDeWe Group, which Signa owns alongside Thailand’s Central Group, is the retail working firm behind Berlin’s equal of Harrods and a fleet of different luxurious shops in Germany and Switzerland. It rents the buildings for all of those — usually synonymous in customers’ minds with the manufacturers themselves — from Signa Prime.
KaDeWe is a worthwhile enterprise, and Central Group has repeatedly pressured that it has the assets to insulate it from any bother that may come up from its co-shareholder’s difficulties.
Signa Division Shops
Signa owns one other retail fleet, although one much less cherished by Benko.
Galeria Karstadt Kaufhof is Germany’s largest division retailer chain and the third-largest in Europe. It’s a mid-range retailer that has been struggling financially as customers have soured on the excessive road.
Signa took full possession 4 years in the past and started promoting the property from below it: a small portion of essentially the most invaluable Galeria websites, in inner-city areas, have been offered to Signa Prime. The remainder have been offered to third-party buyers to boost funds.
GKK has limped on through two restructurings, in 2020 and 2022, with 1000’s of job losses and scores of retailer closures. It was anticipating to obtain €200mn from Signa as a part of a turnaround plan, with the primary tranche due in February. The corporate employs 18,000 individuals.
Till earlier this 12 months, Signa Division Shops additionally owned the Austrian furnishings chain Kika/Leiner. In June, Signa offered it for €400mn. The corporate went bust less than a week later.
Signa US, Signa Motels and Signa Media
Signa additionally has intensive pursuits past the retail sector. Its US three way partnership with the property developer RFR purchased the Chrysler constructing in 2019. On the time, the transfer was seen as one in every of Benko’s boldest bets but and a sign that Signa noticed a future within the cut-throat world of New York property hypothesis.
Its lodge arm, in the meantime, owns a number of luxurious locations in Europe, together with the Resort Bauer Palazzo in Venice, which Signa is in the midst of growing, and Chalet N in Lech, probably the most unique ski resorts within the Alps.
In Benko’s native Austria, Signa additionally owns minority stakes within the nation’s largest newspaper, the tabloid Kronen Zeitung, and the broadsheet Kurier.
The buyers
At virtually each layer of the Signa community are minority co-investors and a bewildering array of lenders.
Amongst them are a few of Europe’s wealthiest household places of work such because the Rausings and the Peugeots.
Outstanding entrepreneurs and captains of business have additionally invested, together with Ernst Tanner, chief govt of chocolatier Lindt & Sprüngli; Torsten Toeller, the pet meals magnate; Hans Peter Haselsteiner, the Austrian industrialist; and the heirs to System One racing legend Niki Lauda.
All of them at the moment are racing to grasp precisely what their investments are price.
The opaque nature of the group’s construction, in addition to aspect letters, profit-sharing agreements, promissory notes and substantial intercompany loans, imply nobody has a transparent sense of what is going to occur subsequent, in response to a number of sources with direct information of the corporate.
The lenders
At the very least 120 banks are uncovered to Sigma, in response to individuals with information of the conglomerate and its entities. Swiss wealth supervisor Julius Baer is the one lender to publicly define its publicity, stating this week that it had SFr606mn ($692mn) of loans to a European firm, which individuals near the enterprise have confirmed is Signa.
Austria’s Raiffeisen Financial institution Worldwide has greater than €750mn of publicity, in response to individuals conversant in the small print, whereas paperwork seen by the FT point out a spread of worldwide banks have excellent loans to Signa, together with UBS-owned Credit score Suisse, Financial institution of China, France’s Natixis and Italy’s UniCredit.
Smaller regional banks are much more uncovered, relative to their measurement. German state-owned Landesbanken, together with Frankfurt-based Helaba and Munich-based BayernLB, have excellent loans price a whole lot of thousands and thousands of euros, in response to the paperwork. Different Raiffeisen associates in Austria are additionally large backers of Signa.
JPMorgan analysts final month estimated that Signa owed at the very least €13bn to lenders in whole.
The Benko Household Basis, Laura Basis and holding corporations
On the high of every little thing sit Benko’s two foundations in Innsbruck. Through the years, they’ve been the most important monetary beneficiaries of Signa. However they’re opaque. Benko’s mom, Ingeborg, who raised him alone, is the controlling signatory of each foundations.
The foundations’ grip on Signa just isn’t full, nonetheless. Benko has slowly relinquished management in return for funding. Aspect agreements between Benko and buyers allowed him to retain management. However as Signa Holding approached insolvency this week, the rift has widened.
A number of individuals near the scenario have informed the FT that belief has virtually completely evaporated between Benko and a few of his exterior buyers.
Benko, they mentioned, nonetheless appeared to consider his empire might be salvaged. Everybody else is hoping to get out with as a lot of their capital intact as they will.
Further reporting by Owen Walker in London
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