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Rene Benko appears ready to withdraw

Rene Benko appears ready to withdraw

Fellow investors urged Rene Benco to withdraw from Signa Group. Only then will they be ready to contribute to the restructuring of the group. Although Benko has signaled a decline, it is clear that he is also negotiating with the Saudi sovereign wealth fund about a major financial injection.

Austrian businessman Rene Benko is set to take a back seat at Cigna.

Georg Hochmuth/APA

What’s the situation like at Cigna?

There is a resolution looming in the power struggle over the Signa Group. Various Austrian media outlets reported on Friday that company founder Rene Benko is essentially ready to exit the company. But negotiations on the details are still ongoing. No official confirmation of the withdrawal was issued until Friday evening. Benko did not respond to NZZ’s requests for comment.

In the past few days, important fellow investors have pushed for Banco’s withdrawal. In a joint letter, he demanded that all shareholders who invest in Benko at the company level withdraw from the management of the company and hand over its voting rights to a trustee for at least 24 months. This is the only possible way of crisis management to save the group. Instead of Benko, German restructuring expert Arndt Goewitz should take over the business.

Signa Holding’s co-investors are famous business giants from German-speaking countries: Chairman of the Board of Lindt & Sprüngli Ernst Tanner, Thurgau coffee machine entrepreneur Arthur Eugster, German Fressnapf founder Torsten Toeller, and Austrian building contractor Hans Peter. Hasselsteiner and the secretive Brazilian-Swiss businessman Ricardo Ardoini.

However, it does not appear that Banco’s withdrawal has been reached yet. Compared to the Austrian Radio Ö1 Co-investor Haselsteiner said Banco had basically responded to shareholder demands, “but not completely yet.” The talks were still ongoing. According to Haselsteiner, a solution could be found over the weekend.

This indicates that the terms of Banco’s withdrawal are still being negotiated. Haselsteiner said Benko was willing to sign a waiver regarding his voting rights. But in return, he wanted to know whether “shareholders would also be willing to contribute to the restructuring of the group with such a long-term solution.”

In other words, Benko appears to be asking fellow investors for an infusion of new money. This would increase the chances that Signa Group would be rescued – and that Benko’s own investments would not become worthless.

Benko directly and indirectly owns a slim majority in Signa Holding. His fellow shareholders want him to transfer his voting rights to restructuring expert Arndt Goetz. According to Haselsteiner, they trust him in his ability to create order and transparency in the complex Signa Group, which consists of various real estate companies and department store chains.

However, it cannot be ruled out that Banco will seek solutions other than surrendering to its fellow shareholders. According to informed sources, he is said to be in negotiations with the Saudi sovereign wealth fund about a financial injection to Signa Group.

Cigna Real Estate Holding Company

Cigna Real Estate Holding Company

What problems does Signa Group face?

Signa Group is a large project developer and always needs money to build properties. However, as interest rates rise, financing becomes more expensive.

In addition, a significant investor is said to have withdrawn a financing commitment of several hundred million euros in the past few months. Therefore, Signa needs new money quickly – on the one hand so that construction can continue on construction sites and on the other hand to refinance several expired loans at higher interest rates.

But it seems that banks and investors are no longer willing to inject new funds due to opaque structures. Co-investors have lost confidence in Banco recently due to the worsening crisis in the Cigna empire.

The situation is also difficult because the European Central Bank (ECB) has also targeted Cigna and urged banks to be more cautious.

Problems have emerged in the past few days. Work on many projects has stopped due to unpaid invoices. Among other things, work on the Elbtower in Hamburg has been halted. Likewise at Carsch-Haus in Düsseldorf, another site of the KaDeWe group, and at Königstrasse in Stuttgart. There also appears to be an interruption in construction activity at the Gänsemarkt-Passage project in Hamburg.

How is Cigna trying to save itself?

On the one hand, Banco sold real estate to get money. In March this year, Signa sold half of Berlin’s KaDeWe ownership to Central Group’s Thai business partners, which operate the department stores. In addition, Hamburg billionaire Klaus-Michael Kühne, who does not invest at the company level but does invest in Cigna Prime Real Estate, acquired an office complex called PIM from Cigna.

However, the logistics company rejected speculation that Kohne might be involved in Elbtower. This may also be due to the fact that it is sensitive to conduct transactions with Signa Group at this time. In the event of insolvency, there will be a risk that the insolvency administrator will cancel transactions retrospectively.

On the other hand, Signa Group divested itself of investments in retail. The Signa Home & Lifestyle division with furniture store Kika/Leiner in Austria and the Signa Food & Restaurants division with Karstadt Restaurants, a joint venture with Eataly, have already been sold.

Benko himself pulled a promised €150 million capital injection from sporting goods retailer Signa Sports United (SSU) – resulting in the company having to declare bankruptcy. German chain Sportscheck has been sold to British retailer Frasers.

Cigna Holdings Retail

Cigna Holdings Retail

What does the crisis mean for Globus stores?

Since the beginning of 2020, Signa has owned Globus department stores and some real estate along with Thai Central Group.

However, Globus is likely to be relatively little affected by Signa’s problems. Conversations with insiders and real estate experts suggest that the retail business is debt-free and, according to various sources, in a good position. Properties and conversion projects in turn – unlike most other properties in Benko’s portfolio – are financed on a long-term basis.

Even if Cigna sank, Globus would not necessarily be in danger. Operations will continue and property owners will continue to receive their rent. In addition to the Thais, instead of Cigna, the owners – at least temporarily – are the lender banks (a large consortium of cantonal banks), which can in turn cover mortgage claims with rental income.

The central group can then consider whether it would also like to acquire the remaining shares in retail and real estate or whether it is looking for a new partner.

What is the situation with the Galleria department store group?

In Germany, the Galleria department store group (formerly: Galleria Karstadt Kaufhof) has been experiencing financial problems for some time. The company was forced to undertake restructuring after pandemic-related closures in 2020. But the planned restructuring was not enough, so the Signa subsidiary was forced to file for bankruptcy again in 2023 and close more department stores.

According to the “Food newspaper” Galleria is said to have once again ended the 2022/23 financial year with a loss at the end of September. In insolvency proceedings, owner Cigna promised to provide the department store with €200 million for the renovation.

Only a small portion of this money has flowed; The next batch is scheduled to flow next spring. However, according to informed sources, this money is not necessary for Galleria’s survival – unlike what was the case with Cigna Sports United. In order to raise funds, Galeria also wants to sell its Belgian Inno store.