Creditors of one of the main companies in René Benko’s Signa Group have alleged it fell into insolvency because of “illicit” financial transactions, not a downturn in the European property market.
Their claim contradicts earlier findings of the company’s insolvency administrator and statements by Signa’s management and shareholders, which have so far pinned blame for the luxury property conglomerate’s collapse on rising interest rates and their impact on property valuation models.
Signa Development Selection (SDS) was one of the three central entities in the Signa Group. It was declared insolvent on December 29th and owes more than €2.6 billion.
SDS’s supervisory administrator on Monday acknowledged creditors’ “massive concerns” in a report that noted “cash outflows, upstream and side-stream payments totalling more than €600 million” which were being investigated as a matter of urgency. Recovering the missing cash would be the “decisive factor” in repaying creditors, the administrator’s report added.
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SDS’s administrator has now recommended its assets be placed into a trust.
Because of the way Mr Benko set up the Signa group, which owns stakes in Selfridges (which in turn owns Irish department stores Brown Thomas and Arnotts) and the Chrysler building, the group has fractured after its collapse, with creditors and shareholders vying over collateral and liabilities across a network of more than 1,000 different companies.
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Mr Benko – a paper billionaire by his early 30s – filed for personal insolvency in Austria last week. It is unclear what assets he may still have access to via a series of opaque family trusts controlled by his mother in Austria and Liechtenstein.
SDS holds Signa’s portfolio of development assets: construction projects the company hoped to sell soon after completion. The company was the most cash-generative part of the Signa group.
Signa Prime and Signa Holding, meanwhile, own the group’s prized trophy assets: dozens of high-end addresses from designer shopping precincts to ultra-luxury hotels in Europe’s wealthiest cities.
A 35-page analysis prepared by one large, international group of SDS creditors, seen by the Financial Times, said there were “glaring contradictions” in the reasons given for the company’s insolvency.
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They claim the company should have survived as a going concern, based on money raised through successful asset sales in 2023, but was instead used as a cash box for other parts of the Signa empire.
In one example – the sale of the BEAM project in central Berlin – the creditors noted that the proceeds of the sale, worth more than €100 million, did not appear to have materialised on SDS’s balance sheet as expected, while the project’s debt remained there.
The creditors’ new analysis identified a further €297 million of outflows to six entities which they claimed were not within the legally defined scope of SDS’s “corporate perimeter”, in what it said was a “clear violation of Austrian capital maintenance rules”.
The money was paid out in 2023, when the analysis stated it was already well known to SDS’s management, as reported in the company’s financial updates, that the company was financially under strain and it was important to preserve capital.
“This leads ... to the conclusion that it is highly likely that money from SDS was purposefully misappropriated,” the analysis said.
The outflows are in addition to the €300 million of unexplained lending by SDS to entities controlled by Mr Benko’s family foundation, as previously reported by the FT.
A spokesperson for the group of creditors declined to comment. Lawyers for Signa Development and Mr Benko and a spokesperson for its administrator did not respond to requests for comment.
– Copyright The Financial Times Limited 2024
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