The company at the centre of René Benko’s property empire more than doubled its debt in the first nine months of the year, indicating the scale of the liquidity problems facing the group as it tried to stave off financial collapse.
Signa Holding, whose €27 billion of assets include department stores Selfridges in London and KaDeWe in Berlin, had outstanding liabilities of just under €2 billionn at the end of 2022, up from €635 million the previous year, according to accounts reviewed by the Financial Times.
Signa is part-owner of department store group Selfridges, which in turn owns Brown Thomas and Arnotts in the Republic.
By the end of September this year, borrowings had risen to about €5 billion, according to the company’s insolvency filing. Signa Holding went into administration in Vienna last week.
The filing, confirmed by Austrian creditors association AKV, also shows a sharp decline in the value of Signa Holding’s assets.
At the beginning of this year, the company valued its stakes in subsidiaries at €5.2 billion. By September, their book value had fallen to €2.8 billion, with a liquidation value of just €314mn if the assets had to be sold at short notice.
Signa did not respond to a request for comment.
The rising debt burden has emerged as lenders and investors are still trying to assess their exposure to the Signa group. Many remain unclear how money shifted around its corporate web – a tangle of more than 1,000 companies and trusts – as the business scrambled for funds.
Some investors in Signa Holding were caught off guard by the scale of the debt increase, one person close to them said.
Other companies in the wider Signa group are still trading, including Signa Development and Signa Prime, two subsidiaries of Signa Holding that own most of the group’s assets.
However, those entities appointed restructuring experts on Friday and Signa Development’s bonds are trading at less than 10 cents on the euro, showing that bondholders are braced for heavy losses.
Benko, the company’s founder and largest shareholder, has spent much of the last year trying to raise cash for the group, as hundreds of millions of euros of debt has come due at a time of falling real estate valuations and scarcer liquidity.
The Austrian billionaire brought in some new money, including €100 million from the Middle East and €400 million in capital from Signa Holding’s existing shareholders. But the sums have not been enough to avoid emergency measures.
The €5 billion of outstanding Signa Holding debt detailed in the company’s insolvency filing include €1.3 billion owed to other Signa Group entities. Signa Prime and Signa Development have lent a total of €730 millionn to other unnamed borrowers within the group, believed to be Signa Holding, two people familiar with the situation said.
Signa amassed €1bn in “guarantees” that were not part of its liabilities at the end of last year, according to a person with direct knowledge of the filing. A further €2bn of debts were not clearly classified in the insolvency document.
Signa Holding’s management has 90 days from last week’s filing to present a restructuring plan to creditors. Benko has resigned his supervisory board seat, but retains voting control of the holding company. – Copyright The Financial Times Limited 2023