The Austrian real estate investor Rene Benko has developed his Signa Group into one of the largest European real estate groups. Signa has run into rough waters with banks. First, reports last week about adjustments to the old balance sheets of the real estate group caused initial nervousness. Now it became known that the European Central Bank (ECB) was scrutinizing banks involved regarding their lending to the Signa Group. This has not happened before.
The ECB Review
A team of ECB supervisors is to examine European banks with a business relationship with Signa. “This has never happened before,” a long-time bank executive who wishes to remain anonymous told a German newspaper. The ECB’s review concerns the decline in the value of the underlying real estate collateral. It is necessary to assess whether the results of Signa‘s operations are sufficient to service loans and interest and whether the value of the properties in the event of default is sufficient to ensure the repayment of the loan without loss.
Adler Group v. Signa Group
In contrast to the listed Adler Group, which short seller Fraser Perring successfully attacked, Signa Group is a network of private companies. The group is notorious for its secrecy about its finances. Therefore, much less information is available to analysts or journalists. Attacks by short-sellers are not possible. Signa Group has not yet filed the 2021 and 2022 balance sheets with the company register. Therefore, data on the current debt and liquidity situation is also unavailable.
Until recently, Rene Benko was considered the 6th richest Austrian with an estimated fortune of €5 billion. In the meantime, the real estate crisis has reduced Benko’s assets as well as the financing capacity of his Signa Group.
Besides the Adler Group of Austrian investor Cevdet Caner, Rene Benko and the Signa Group are two of the largest European real estate groups in the crosshairs of banks and investors. Only a few weeks ago, a court in the UK approved the Adler Group‘s restructuring plans. However, Adler Group, which was attacked by short-seller Fraser Perring, is not yet in a safe haven.
Political Enemies
In Germany, Benko has become persona non grata and made political enemies. Likewise, in Austria. He has made many political friends in the last two decades of the real estate boom. He is a good acquaintance of the fallen former Austrian Chancellor Sebastian Kurz. However, politics is dangerous territory. Benko is also a defendant in a criminal case in Austria for bribery because of his political friendships.
In the wake of the Covid-19 pandemic, Signa Group received subsidies from the German and Austrian governments, reportedly over €700 million for the Galeria Karstadt Kaufhof retail group, which Signa Group acquired, and the Kika-Lainer furniture retailers, which it also acquired. Despite the government subsidies, the companies were sent into insolvency, and thousands of employees lost their jobs. This is also an image disaster for the politicians involved.
Devastating Rumours
Rumors are running in Vienna that Signa Group is challenged with serious liquidity issues and may soon be unable to pay interest on its billion-dollar liabilities. The now-announced investigation by the ECB will not make this situation any easier. Investors and banks are like shy deer and will give Benko and Signa a wide berth.
