A few days ago, investors withdrew their confidence in the former real estate tycoon René Benko, 46, and insisted that he transfer the voting rights of his shares in the Signa Group to the appointed restructuring expert. Benko’s Signa empire immediately needs another €300 million; otherwise, it will collapse. The liabilities to banks amount to around €11 billion, of which €2 billion is due this year. But the money is not available; the banks are trembling.
Signa’s Missing Liquidity
The Signa Group no longer has sufficient liquidity to continue its existing construction projects. Construction has been halted on prestigious European projects such as the Elbtower (link) in Hamburg, which was to have become the new landmark of the German city of Hamburg.
Signa‘s result turned significantly negative, with a loss of €1.019 billion in 2022 after a profit of €700 million in 2021. As early as 2022, the Signa Group would no longer have been able to service its liabilities from its own resources. Without a capital increase of €750 million, Signa would have already been threatened with insolvency last year.
Troubled Signa Investors
However, investors do not really know how bad the financial situation is. Benko has created a non-transparent network with an estimated 1,000 companies. Concerned investors now include well-known entrepreneurs such as the Austrian construction magnate Hans Peter Haselsteiner, the German Fressnapf founder Torsten Toeller, the Swiss Lindt & Sprüngli Chairman Ernst Tanner, coffee entrepreneur Arthur Eugster and the entrepreneur Julia Dora Koranyi-Arduini.
Some of the investors have buy-out clauses that allow them to sell their shares back to Benko. The first investors are said to be planning to sell their back shares to Benko and no longer want to put any fresh money into the group. However, it’s highly questionable if Benko has sufficient funds to buy these shares back.
Money From Saudi Arabia?
Benko is said to have been negotiating fresh money with the Saudi Arabian sovereign wealth fund PIF for weeks. According to research by Business Insider, intensive talks are said to be underway regarding a loan worth millions. The fund, led by Crown Prince Mohammed bin Salman (38), was founded in 1971 and has assets of €700 billion. The PIF is set to grow to more than one trillion euros by 2025. The fund has recently caused a stir, particularly with investments in sport.
Troubled Banks
The financing banks have been trembling for weeks. RLB Oberösterreich, a local bank in Austria, in particular, is said to have lent billions to the Signa Group. In February 2023, it became known that the European Central Bank (ECB), which is responsible in the EU for the “significant institutions”, i.e., the systemically important financial institutions of the member states, had carried out a special audit of Signa loans at the financing banks. The result was not made public.
Deutsche Bank had previously terminated its business relationship with the Signa Group, citing the corruption allegations against Rene Benko as the reason for this. The Swiss LGT has also terminated its business relationship with Signa. US rating agencies such as Fitch have already downgraded the Group’s credit rating during the first half of the year.
Insiders report that it will be difficult to restructure Signa given the opaque network of companies that Benko and his team have created. A break-up and the insolvency of individual companies seem to be the realistic solution unless the Crown Prince of Saudi Arabia steps in. But it cannot be assumed that the crown prince will step in lightly with the billions.
It is much more likely that the banks will have to grant a considerable debt reduction or, in the event of insolvency, will be forced to take on only part of their outstanding loans. Benko is already under criminal investigation for alleged corruption. If the Austrian media are to be believed, further investigations are likely to follow.
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