Can the big bang in Benko's empire still be averted?
Who is René Benko?
The Austrian investor was long regarded as a model entrepreneur. In Germany, his Signa Group is best known as the owner of the Galeria Karstadt Kaufhof department store chain. His holding company, which has grown rapidly over the years, includes real estate and retail holdings worth billions. Forbes estimated his fortune at 5.6 billion dollars in 2021, making him the third richest Austrian.
Directly and indirectly, Benko holds around 50 percent of the shares in Signa Holding through his foundations. However, he has no official function, but is merely Chairman of the Advisory Board, an advisory body. Nevertheless, all the threads still run through him.
Benko's recipe for success: well-known investors who have invested a lot of time and money in him, as well as influential friends from the world of politics. His investors include entrepreneurs such as Austrian billionaire and Strabag boss Hans-Peter Haselsteiner and logistics billionaire Klaus-Michael Kühne. Institutional investors such as the RAG Foundation are also on board. Influential Austrian politicians such as former chancellors Alfred Gusenbauer and Sebastian Kurz also sit on the advisory board of Signa Holdung.
Where does Benko have his fingers in the pie?
The foundation of his empire is the real estate business. The portfolio includes prestigious luxury department stores such as the KaDeWe in Berlin and the Alsterhaus in Hamburg as well as the Elbtower currently under construction in the Hanseatic city (the project is now on hold due to a lack of funds). In addition, the so-called Alte Akademie in the pedestrian zone in Munich (here, too, construction has been delayed) and the Goldenes Quartier, a business district in Vienna, as well as the Chrysler Building in New York. The value of real estate in prime inner-city locations is estimated at 20 billion euros. The gems such as KaDeWe are bundled in Signa Prime Selection. There is also Signa Real Estate, which also owns the Galeria Karstadt Kaufhof department store chain, and the development subsidiary Signa Development Selection.
Signa Sports United (SSU), which owns a number of online sports stores, has already filed for insolvency. Benko is also involved in the media business. In 2018, Signa Holding acquired shares in the Austrian daily newspapers Kronen Zeitung and Kurier. Benko is also investing in digitalization. Signa holds a 70 percent stake in the agency Hoods.de.
Why is the Signa Group in trouble?
Like so many companies in the industry, Signa is groaning under the rapid rise in interest rates. The problem is credit financing. Current projects are often financed with debt and concluded at variable interest rates based on the European Euribor reference rate, which has risen sharply since the beginning of 2022. In January last year, the 3-month rate was still at minus 0.57%, most recently at 3.95% (as of 01.11.2023).
It is said that loans amounting to 1.3 billion euros will fall due this year and will therefore have to be paid or rescheduled. In addition, real estate prices have fallen. Signa has had to adjust the value of its real estate portfoliodownwards, meaning that the properties can only be lent against at lower prices. Signa's most important real estate subsidiary, Signa Prime Selection, posted a loss of around EUR 1 billion in 2022 according to its annual financial statements. To make matters worse, Signa had to shoulder the burden of supporting its ailing department store subsidiary Galeria.
There have been increasing indications for months that there are liquidity bottlenecks in the group with its barely transparent ramifications and financial flows. The shareholders have had to repeatedly inject money, which requires capital increases. A capital increase in the summer allegedly only worked with difficulty. The investors are distancing themselves. The sports retail subsidiary Signa Sports United (SSU) recently had to file for insolvency because Benko withdrew a promised equity commitment for the subsidiary Signa Sports United. In addition to the difficult economic situation, there are also home-made problems, such as corruption investigations in Austria and the increased vigilance of the supervisory authorities regarding the involvement of large banks in Signa Holding. Industry insiders speak of a "perfect storm".
Who is Arndt Geiwitz?
The 54-year-old auditor and tax consultant is the man on whom great hopes are now resting. He has relevant previous experience as a restructurer and insolvency administrator. In the past, Geiwitz has made a name for himself in the insolvency proceedings of the Galeria department store chain and the Schlecker drugstore chain. Allegedly, Geiwitz's top priority has always been the continuation of a company, never its liquidation.
What exactly should or can Geiwitz do?
Geiwitz has received an advisory mandate from Signa. According to the business and tax consultancy firm SGP Schneider Geiwitz & Partner, his task is to "familiarize himself and gain an overview of the group of companies". If things go as the shareholders demand, he will soon take on another role: Benko is to transfer his voting rights to him. This would make Geiwitz chairman of the advisory board, a trustee for Benko and the direct contact for shareholders and investors.
However, quick solutions are not to be expected. According to insiders quoted by the "FAZ" newspaper, it will take weeks just to shed light on the widely ramified company empire. Geiwitz will not take on the role of insolvency administrator should Signa go bankrupt. He is too partisan for that because of Galeria Kaufhof and his closeness to Benko.
Can Geiwitz turnthe tide?
Doubtful. The insolvency proceedings at Schlecker ended up costing 25,000 "Schlecker women" their jobs. He did have investors on hand at the time, but in the end they all turned him down. The rescue of Galeria Kaufhof is also only a recommendation to a limited extent. The chain has already gone through two insolvencies and the federal government lost almost 600 million euros. Last year, Benko applied for state aid for the third time, and the department store giant's coffers are said to be at low tide again.
What happens next?
Not even Arndt Geiwitz probably knows at the moment whether Signa can still be saved. There are too many unanswered questions: Will Benko still find investors? How deep is Benko's convoluted empire really in the red? One thing is certain: Benko is still in the hot seat. The shareholders continue to demand his withdrawal as Chairman of the Advisory Board of Signa Holding. Contrary to what was announced last week, an agreement has not yet been reached. Benko is still attaching conditions to his withdrawal and the shareholders are divided. Internal talks are ongoing.
Elsewhere, there is also allegedly talk and tinkering with a rescue: According to Business Insider, Benko has been personally negotiating with Saudi Arabia's sovereign wealth fund - the Public Investment Fund (PIF) - for weeks. A cash injection in the three-digit million range for the Signa Prime Selection real estate division is intended to bridge the acute payment difficulties. The fund has assets of over 700 billion euros and is controlled by Crown Prince Mohammed bin Salman. He is associated with the contract killing of journalist Jamal Khashoggi in Istanbul in 2018 and has since become known as the "blood sheikh".
It is unclear whether Geiwitz is aware of these talks or not. The Swiss newspaper "SonntagsZeitung" writes that it was a solo effort by Benko and that nobody at Signa knew anything about it. Allegedly, the Saudis have invested hundreds of millions of euros from PIF in Signa. They would therefore have a concrete interest in protecting their investment. But time is pressing. According to Business Insider, money must come from Riyadh by the beginning of next week.
Rene Benko is currently seeking financial assistance from Saudi Arabia's Public Investment Fund (PIF) to alleviate the financial difficulties of his real estate division, Signa Prime Selection. This potential investment could provide a much-needed cash injection to help cover payment challenges.
Despite Arndt Geiwitz's advisory role within Signa, policies regarding Saudi investment and Benko's personal negotiations with the PIF have reportedly remained unknown to him, suggesting a separate, independent effort by Benko to secure financial aid.
Source: www.ntv.de
