Over twenty years, René Benko grew his Signa property empire from humble beginnings fixing up residences in his house metropolis of Innsbruck to its apex as considered one 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 among the most prestigious addresses throughout the continent, making Benko a billionaire. Only the Pope and the British monarchy had higher buildings than him, he favored to joke.
Its complexity, nevertheless, has been a key aspect within the disaster that Signa now faces. Over the previous yr, traders have balked at giving the group extra money, involved in regards to the elaborate monetary engineering Benko was utilizing. Without contemporary funds, insolvency turned inevitable.
The Financial Times has simplified the Signa Group’s construction of greater than 1000 company entities as an example the challenges now dealing with lenders and traders. 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.
Under “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. If they fail, an unbiased administrator will take over.
Benko continues to be the controlling shareholder in Signa Holding. But there are outdoors traders and billions of euros of debt. Balancing the pursuits of everybody concerned might be a fiendish job.
Advisers, traders and lenders who’ve spoken to the Financial Times have all mentioned the identical factor: nobody appears to know precisely who has a declare to what. But in latest months, one insider mentioned, cash had been flowing from all arms of the Signa empire again in direction of Signa Holding.
Signa Sports and Signa Real Estate Management Germany
The monetary tremors started on the extremities.
The sports activities ecommerce platform Signa Sports United was listed on the New York Stock Exchange in 2021 with a valuation of $3bn. After months of deteriorating funds, nevertheless, 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 SmoothBank, Saudi Arabia’s Public Investment Fund and Abu Dhabi’s Mubadala — mentioned it will sue.
Then on Friday final week, the corporate answerable for overseeing the day-to-day administration of Signa’s German property initiatives, Signa Real Estate Management Germany, declared itself bancrupt too. The money from its Austrian mum or dad merely stopped flowing.
Signa Prime and Signa Development
All eyes are actually on two corporations within the Signa community: Signa Prime and Signa Development. The pair personal essentially the most helpful property within the Signa portfolio.

Signa Development’s remit is to purchase land and construct new workplace buildings or venues that it may possibly shortly promote. Its initiatives embody the BEAM and Glance workplace websites in Berlin and the Twentytwo tower in Vienna.
The major position of Signa Prime, in contrast, is to carry and develop top-tier properties for the long run, getting cash from their rental revenue 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 development initiatives, together with the Elbtower in Hamburg.
Both corporations are nonetheless buying and selling and each share the identical administration and supervisory boards.
Among these on the supervisory board are Robert Peugeot, of the eponymous car dynasty; Alfred Gusenbauer, the previous chancellor of Austria; and Karl Sevelda, the previous chair of Raiffeisen Bank International, considered one of Signa’s largest lenders.
The properties
In all, Signa claims to have a portfolio of buildings value greater than €27bn and a pipeline of developments value €25bn, in response to shows it has given to traders.
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.
Those valuations saved on rising in a shopper market fuelled by low cost central financial institution cash. The debt wanted to finance such initiatives was low cost too. That meant Signa may quickly develop. In 2019, the corporate recorded its biggest-ever revenue, with Signa Holding making greater than €1bn.

Up till final yr, Signa was nonetheless signing commitments for billions of euros value of latest developments.
Work on the biggest of these — the Elbtower, resulting from be Germany’s third-tallest skyscraper — halted in October when Signa stopped paying staff’ wages.
Signa’s bullish valuations hinged on the rental incomes its properties may 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 vital tenants — those that paid the rents that justified the rising valuations — had 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 malls 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 harassed that it has the assets to insulate it from any hassle which may come up from its co-shareholder’s difficulties.
Signa Department Stores
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 is 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 underneath it: a small portion of essentially the most helpful Galeria websites, in inner-city places, had been bought to Signa Prime. The relaxation had been bought to third-party traders to lift funds.
GKK has limped on via two restructurings, in 2020 and 2022, with hundreds 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 firm employs 18,000 folks.
Until earlier this yr, Signa Department Stores additionally owned the Austrian furnishings chain Kika/Leiner. In June, Signa bought it for €400mn. The firm went bust lower than every week later.
Signa US, Signa Hotels and Signa Media
Signa additionally has in depth pursuits past the retail sector. Its US three way partnership with the property developer RFR purchased the Chrysler constructing in 2019. At the time, the transfer was seen as considered one 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 resort arm, in the meantime, owns a number of luxurious locations in Europe, together with the Hotel Bauer Palazzo in Venice, which Signa is in the midst of creating, and Chalet N in Lech, one of the vital 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 traders
At virtually each layer of the Signa community are minority co-investors and a bewildering array of lenders.
Among them are a few of Europe’s wealthiest household workplaces such because the Rausings and the Peugeots.
Prominent 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 Formula One racing legend Niki Lauda.
All of them are actually racing to know precisely what their investments are value.
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 data of the corporate.
The lenders
At least 120 banks are uncovered to Sigma, in response to folks with data 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 Bank International has greater than €750mn of publicity, in response to folks acquainted with 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 Suisse, Bank 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 value a whole lot of hundreds of thousands of euros, in response to the paperwork. Other Raiffeisen associates in Austria are additionally large backers of Signa.
JPMorgan analysts final month estimated that Signa owed a minimum of €13bn to lenders in complete.
The Benko Family Foundation, Laura Foundation and holding corporations
At the highest of the whole lot sit Benko’s two foundations in Innsbruck. Over the years, they’ve been the most important monetary beneficiaries of Signa. But they’re opaque. Benko’s mom, Ingeborg, who raised him alone, is the controlling signatory of each foundations.
The foundations’ grip on Signa is just not full, nevertheless. Benko has slowly relinquished management in return for funding. Side agreements between Benko and traders allowed him to retain management. But as Signa Holding approached insolvency this week, the rift has widened.
Multiple folks near the state of affairs have informed the FT that belief has virtually completely evaporated between Benko and a few of his exterior traders.
Benko, they mentioned, nonetheless appeared to consider his empire may very well be salvaged. Everyone else is hoping to get out with as a lot of their capital intact as they will.
Additional reporting by Owen Walker in London
https://www.ft.com/content/31884c4d-2da7-4b43-917e-3180e9eafa3d