Signa files for insolvency

February 2024 | DEALFRONT | BANKRUPTCY & CORPORATE RESTRUCTURING

Financier Worldwide Magazine

February 2024 Issue

Austrian real estate and retail group Signa Holding filed for insolvency in late November, making it the largest victim of Europe’s property crash to date.

The company, which owns half of New York’s Chrysler Building, almost all of Germany’s biggest department stores and part of Selfridges in London, filed for administration with debts of around $5.4bn.

Signa had needed to find up to $652m to fulfil its short-term liquidity requirements. Although it approached sovereign wealth funds and private equity giants, the company’s complex conglomerate structure apparently hampered talks. Sigma was also negatively impacted by the end of cheap interest rates and declining demand for office space globally.

In autumn 2023, the company alerted investors that it was facing liquidity problems when it backed out of plans to inject more capital into a troubled German online sports retail business. There are also doubts around the prospects of the company’s Galeria Karstadt Kaufhof department stores, which are located in many of Germany’s city centres. Of the 170 branches owned by the company in 2020, only 91 remain, and in early 2023 Galeria presented an insolvency plan to shore up its remaining subsidiaries. The future of that plan is now uncertain, particularly as it obliged parent company Signa to contribute $218m to Galeria’s recovery, but a large portion of that money has yet to change hands.

In its press release announcing the filing, Signa said its retail investments “did not bring the expected success” with the sector under “severe economic pressure” in Europe, while also citing a “negative impact on business development in the real estate sector in recent months”. Signa said it would initiate insolvency proceedings at a Vienna court.

“The aim is the orderly continuation of operational business operations within the framework of self-administration and the sustainable restructuring of the company,” the company added. “Despite considerable efforts in recent weeks, the necessary liquidity for an out-of-court restructuring could not be sufficiently secured, so Signa Holding GmbH is applying for restructuring proceedings with self-administration.”

Signa is owned by Austrian billionaire Rene Benko. It acquired the iconic Selfridges business in London as part of a 2022 joint venture in a £4bn joint deal with Thai conglomerate Central Group, which put roughly £1.7bn of debt on the two firms. According to its website, Signa has holdings worth €27bn and projects worth €25bn in development.

The company’s financial difficulties led its shareholders to oust Mr Benko in November 2023, and he is now fighting for control of his company. Chairmanship of the supervisory board passed to Arndt Geiwitz, who will manage the reorganisation process.

Mr Benko has suffered a number of professional and personal setbacks, including having his offices raided by the Austrian police. He has denied wrongdoing and has not been charged. According to Signa, The Benko Family Private Foundation remains the company’s largest shareholder. According to Bloomberg, Italy’s UniCredit SpA has lent about $655m to companies that are part of the Signa group, mainly through its Bank Austria unit. Raiffeisen Bank International has a little over $750m in exposure and Swiss wealth manager Julius Baer Group has $692m in loans to Signa.

Following the filing of the group holding company, several other Signa companies also filed for insolvency, with a number of others expected to follow suit.

On 1 December, it was also revealed that the company had sold its stake in the prized KaDeWe department store building in Berlin to Central Group in March for around €300m. Signa Prime, owner of the KaDeWe building, and part of the wider Signa Group is still operating, but on 8 December its supervisory board appointed restructuring experts to take control of the company. Signa had valued the KaDeWe property at €1.5bn up to November 2023. The Central Group already co-owned the KaDeWe Group operating company, which runs the department store business and leased the property from Signa.

Richard Summerfield