European luxury property group Signa files for administration

Signa Holding, the central company in the sprawling property group that 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 on Wednesday.

The rapid unravelling of the group has left lenders across Europe racing to assess their exposure to the business empire of Austrian billionaire René Benko and work out what claims they might have on Signa’s tangled portfolio of assets. 

“This will be one of the most complex corporate restructurings since the financial crisis,” said one Vienna-based lawyer who is familiar with Signa. “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 earlier on Wednesday, the heavily indebted group said Signa Holding had applied for self-administration — a procedure in Austrian corporate law in which a company restructures itself without handing control of the process to an external administrator. 

“Despite considerable efforts in recent weeks, the necessary liquidity for an out-of-court restructuring process could not be sufficiently secured, and so Signa Holding has now applied for reorganisation proceedings,” it said.

Other key elements of the Signa network, a multi-layered ownership structure of more than 1,000 corporate entities and trusts in Europe, the US and offshore, are still operational, however. Those include Signa Prime, which people with knowledge of the details say holds the group’s most valuable assets.

In total, 120 banks are exposed to Signa, according to a person with knowledge of the group’s borrowing. Switzerland’s Julius Baer and Credit Suisse, now part of UBS, as well as Austria’s Raiffeisen, Bank of China, France’s Natixis and Italy’s UniCredit are among the group’s lenders.

Julius Baer has outstanding lending of more than SFr600mn ($690mn) to Signa, and Raiffeisen Bank International more than €750mn, according to people familiar with the details. Both banks declined to comment on specific client relationships but stressed their commercial loan books were well collateralised.

In a note earlier this month, analysts at JPMorgan estimated Signa owed at least €13bn to lenders in total.

Many of the group’s lenders are smaller regional banks that have financed local property projects.

Several German state-owned Landesbanken, including Frankfurt-based Helaba and Munich-based BayernLB, have outstanding loans worth hundreds of millions of euros, according to documents seen by the Financial Times. Helaba and BayernLB declined to comment.

Signa Holding’s administration will send a shockwave across central Europe’s retail sector as it prepares for its most important month of the year. Signa is the majority owner of the region’s biggest department stores, including Germany’s Galeria Kaufhof and KaDeWe, and Switzerland’s Globus.

It is also a shareholder in the Selfridges Group, though Signa’s stake was diluted as its problems began to take hold this month by its co-investor, Thailand’s Central Group, which exercised equity conversion rights attached to a shareholder loan.

Signa and Central jointly acquired Selfridges for £4bn almost two years ago. As well as the department store in London, the Selfridges Group includes retailers De Bijenkorf in the Netherlands, as well as Brown Thomas and Arnotts in Ireland. 

Central insisted that the department stores were unaffected by Signa’s administration. 

“[We] remain steadfast in our commitment to safeguard and support our European luxury stores regardless of our partner’s financial circumstances,” Central said in a statement. “We are in robust financial health and benefit from access to a wide range of funding streams to support the development of this unique portfolio.”

Germany’s biggest department store chain, Galeria Karstadt Kaufhof (GKK), which is owned by Signa and has itself struggled financially for years, said on Wednesday there was no immediate impact from Signa’s insolvency.

GKK announced thousands of job losses this year in an effort to stabilise its balance sheet. It had also been expecting €200mn of support from Signa to finance its turnaround plans, with the first tranche due in February.

“If Signa cannot provide its financial support as promised, Galeria management must be prepared,” said Corinna Gross, head of the national retail group at Verdi, Germany’s biggest union. “The constant bad news at Signa is causing unrest among Galeria employees. They want job security.”

In total, about 40,000 people work in Signa-owned businesses, according to investor presentations prepared by the company in 2022. Signa’s website previously said the group had assets worth €27bn, with a further €25bn of projects in its pipeline.

Benko’s group has been in financial difficulties for more than a year, as its debt-fuelled business model has been hit by rising interest rates.

In 2023 alone, it was due to pay back €1.3bn to lenders, but has struggled to do so, leading to standstill agreements with banks and a search for new capital that involved Benko flying regularly to the Middle East and talks with investors including hedge fund Elliott Management.

Benko’s co-investors have refused to stump up more cash and there was a boardroom rebellion at the beginning of this month.

Shareholders include some of the most prominent names in European business such as France’s Peugeot family, Tetra Pak’s Rausings, Austrian industrialist Hans Peter Haselsteiner and pet food tycoon Torsten Toeller.

At their insistence, Arndt Geiwitz, a German insolvency expert, was brought in this month to take control and attempt a rescue deal to avoid administration.

Signa’s management now has little room for manoeuvre. Although it will lead the process, under Austria’s self-administration regime an external administrator will supervise, with a veto right over any transactions.

Signa has 90 days to present a plan to creditors, which they must accept in order to avoid full administration.

Additional reporting by Owen Walker in London