Today’s News
The prestigious European luxury property conglomerate, Signa Holding, filed for administration, signaling a critical financial downturn. The company, with an extensive portfolio including half of New York’s Chrysler Building, Germany’s major department stores, and a part of London’s Selfridges, is under scrutiny, leading lenders across Europe to evaluate their exposure in Austrian billionaire René Benko’s business domain and untangle the complexities of Signa’s asset portfolio.
Image Source: Ralf Lutter
A Vienna-based lawyer familiar with Signa commented, “This marks one of the most intricate corporate restructurings since the financial crisis.” “There is debt issued from all over the place and I don’t think anyone, even most insiders, even know who owns what after this.”
In a statement made earlier on Wednesday, the financially burdened Signa Holding disclosed that it had filed for self-administration—a process under Austrian corporate law wherein a company reorganizes itself without entrusting control of the process to an external administrator. Despite substantial efforts in recent weeks, the group stated that it couldn’t secure adequate liquidity for an out-of-court restructuring, prompting its application for reorganization proceedings.
Financial Implications And Lenders’ Exposure
Signa’s intricate network, comprising over 1,000 corporate entities and trusts globally, across Europe, the US, and offshore jurisdictions, remains operational. Among these entities is Signa Prime, said to be safeguarding the group’s most valuable assets, according to individuals familiar with the matter.
However, the administration has caused financial ripples among 120 banks exposed to Signa’s debts. Notably, major banks like Julius Baer and Credit Suisse, now integrated into UBS, along with Austria’s Raiffeisen, Bank of China, France’s Natixis, and Italy’s UniCredit, are among the lenders associated with the group.
Julius Baer has extended loans exceeding CHF 600mn (USD 690mn) to Signa, while Raiffeisen Bank International’s exposure stands at more than EUR 750mn (USD 800mn), as revealed by individuals acquainted with the information. Both banks, however, chose not to discuss particular client connections but emphasized the solid collateralization of their commercial loan portfolios. According to JPMorgan analysts, it is estimated that Signa owed at least EUR 13bn (USD 14.3bn) to lenders.
The group’s lenders mostly consist of smaller regional banks that have provided funding for local property ventures. Reports suggest that various German state-owned Landesbanken, such as Frankfurt’s Helaba and Munich’s BayernLB, have substantial loans amounting to hundreds of millions of euros. However, both Helaba and BayernLB have refrained from making any comments on these reports.
Signa’s Retail Ventures Amidst Turbulence
The development will have significant implications for Europe’s retail sector, with Signa owning prominent department stores such as Germany’s Galeria Kaufhof and KaDeWe, and Switzerland’s Globus. The administration, which arrives just before a crucial business period, also impacts the Selfridges Group.
Signa is also a shareholder in the Selfridges Group, though its stake was diluted when Thailand’s Central Group, its co-investor, utilized equity conversion rights related to a shareholder loan due to the emerging problems. The joint purchase of Selfridges for GBP 4bn (USD 5bn) occurred nearly two years ago, comprising the London-based department store alongside other retailers such as De Bijenkorf in the Netherlands, and Brown Thomas and Arnotts in Ireland. Central emphasized that the department stores remain unaffected despite Signa’s administration.
Amidst this financial turmoil, Signa’s administration assures that its department stores remain unaffected, according to co-investor Central Group. Meanwhile, Germany’s Galeria Karstadt Kaufhof, also owned by Signa, reported no immediate impact from the insolvency, despite its own financial struggles and anticipated support from Signa to stabilize its balance sheet.
Image Source: Kurier
The crisis has put approximately 40,000 jobs across Signa-owned businesses at stake. The conglomerate, valued at EUR 27bn (USD 29.6bn) in assets with an additional EUR 25bn (USD 27bn) in ongoing projects, faced financial distress owing to its debt-based business model amid escalating interest rates.
Despite efforts to secure new capital and standstill agreements with banks, Signa’s financial challenges intensified, leading to a rescue deal attempt by insolvency expert Arndt Geiwitz. However, the situation leaves Signa’s management with limited options under Austria’s self-administration regime, requiring a viable plan within 90 days to prevent complete administration.
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