Signa Holding filed for bankruptcy on Wednesday. It is the central company of the vast property group, which owns the Chrysler Building in New York, most of the German department stores, and a part of Selfridges London.
Due to the rapid collapse of the group, lenders from across Europe are racing to determine their exposure to Austrian billionaire Rene Benko’s business empire and what claims they may have on Signa’s complex portfolio of assets.
One Vienna-based attorney who is familiar Signa said, “This will be the most complex restructuring since the financial crises.” There is a lot of debt floating around and no one, not even the most knowledgeable insiders, knows who owns anything after this.
Signa Holding, a heavily indebted company, said in a statement released earlier Wednesday that it had filed for self-administration. This is a procedure under Austrian corporate law where a company can restructure itself without entrusting the process to a third party administrator.
Signa Holding said that despite its efforts over the past few weeks, it was unable to secure enough liquidity to complete a restructuring outside of court. As a result, they have now filed for reorganisation procedures.
However, other key elements of the Signa Network, a multilayered ownership structure consisting of over 1,000 corporate entities and offshore trusts, are still in operation. Signa Prime is one of them, according to people who know the details. It holds the most valuable assets for the group.
A person familiar with the borrowings of Signa has confirmed that 120 banks are involved. Signa’s lenders include Swiss banks Julius Baer, Credit Suisse (now part of UBS), Austria’s Raiffeisen and Bank of China as well as France’s Natixis, Italy’s UniCredit, and Switzerland’s Julius Baer.
According to sources familiar with the facts, Julius Baer owes Signa more than SFr600mn ($690mn), and Raiffeisen Bank International over €750mn. Both banks declined comment on client relationships, but said their commercial loans books were well-collateralised.
JPMorgan analysts estimated that Signa owed lenders at least €13bn in total. The majority of lenders in the group are regional banks which have funded local property projects.
Documents show that several German Landesbanken owned by the German government, including Helaba in Frankfurt and BayernLB in Munich, still owe hundreds of millions of Euros on outstanding loans. Helaba, and BayernLB both declined to comment.
Signa Holdings’ administration will cause a shockwave in the retail sector of central Europe as it prepares to enter its most important month,is the largest owner of central Europe’s department stores including Germany’s Galeria Kaufhof, KaDeWe and Switzerland’s Globus.
Signa is also a shareholder in Selfridges Group. However, its stake has been diluted by Thailand’s Central Group who exercised the equity conversion rights attached with a shareholder loan.
Signa and Central acquired Selfridges together for £4bn nearly two years ago. Selfridges Group also includes De Bijenkorf, Brown Thomas, and Arnotts, in Ireland, in addition to the London department store. Central claimed that Signa’s administration had no impact on the department stores.
Central stated in a press release that “[We] are steadfast in maintaining our commitment to support and safeguard our European luxury shops regardless of the financial situation of our partners.” We are in good financial health, and we have access to many funding sources to help us develop this unique portfolio.
Signa’s bankruptcy has not had an immediate impact on Germany’s largest department store chain Galeria Karstadt Kaufhof, which is owned and operated by Signa. GKK, which itself has struggled financially in recent years, stated that there would be no immediate effect.
GKK announced the loss of thousands of jobs in its effort to stabilize its balance sheet. Signa had also promised to provide €200mn in support of its turnaround plans. The first tranche was due in February.
“Galeria management should be ready if Signa does not deliver on its financial commitments,” Corinna gross, the head of Verdi’s national retail group, said. The constant bad news from Signa causes unrest among Galeria workers. They want job stability.”
Investor presentations prepared by Signa in 2022 show that the company employs a total of 40,000 people. Signa’s previous website stated that the group owned assets worth €27bn and had €#25bn in projects.
Benko’s Group has been facing financial problems for over a year as the rising interest rates have hit its business model, which is based on debt.
It was due to repay €1.3bn in 2023, but struggled to pay it back. This led to standstill agreements and the search for new capital, which included Benko traveling regularly to the Middle East to meet with investors, including hedge fund Elliott Management.
Benko’s investors have refused to put up any more money and there was an outcry in the boardroom at the start of this month.
Some of the biggest names in European business are among the shareholders, including France’s Peugeot Family, Tetra Pak Rausings, Austrian Industrialist Hans Peter Haselsteiner, and pet food tycoon Torsten Toeller.
Arndt Gleiwitz, an insolvency specialist from Germany, was brought on board this month at their request to assume control and try to reach a rescue agreement to avoid going into administration.
Signa’s leadership has now little room to manoeuvre. Under Austria’s self administration regime, an external administrator with a right to veto will supervise the process.
Signa must present to its creditors a plan within 90 days, and they must accept it to avoid a full administration.