2023-11-26 19:33:05
After the first company from its core real estate business filed for insolvency on Friday afternoon, saving the Signa Group has become even more difficult. This assessment of the 23 billion euro Signa Group with its more than 1,000 individual companies and 93 Galeria-Karstadt-Kaufhof department stores was shared by many people we spoke to at the weekend. “Nobody can lose their nerve now, otherwise a lot of people will lose a lot of money,” replied a lender to the FAZ when asked whether the entire Signa empire is now falling apart.
Michaela Seiser
Economic correspondent for Austria and Hungary based in Vienna.
Due to the insolvency application of Signa Real Estate Germany GmbH, a rather small service company of the large existing real estate division Signa Prime, with recent annual sales of 54 million euros, at least the November salaries of around 130 employees are secured by the insolvency money. According to information from the FAZ, the payment of salaries in the coming week was at risk without an application for insolvency.
Bond must be paid back
But the Signa Group needs more money. The project development division Signa Development must repay bondholders a bond worth 200 million euros at the end of this month. The investment company Invesco from Atlanta in the US state of Georgia confirmed to the FAZ that it is one of the bond owners; the also named DWS, the investment company of Deutsche Bank, made no comment.
In addition, according to media reports, the Galeria Karstadt Kaufhof department store group, which belongs to Signa, is preparing to no longer make its rental payments to other Signa companies in Germany. In Berlin at Alexanderplatz, the department store is still paying its rent, according to information from the FAZ.
Project companies are preparing for bankruptcy
However, things look bleak on the many Signa construction sites in Germany, where construction is on hold due to a lack of funding. Stopping construction increases costs by 30 to 50 percent, especially in winter with a lot of rain and frost, experts report. Co-shareholders of unfinished Benko projects can therefore definitely benefit from the insolvency of certain project companies. They were preparing for it, anything else would be negligent, it was said on Sunday.
According to unconfirmed information from negotiating circles, the city of Hamburg has a right of first refusal on the Elbtower, which is already 100 meters high and is a prestigious Hamburg property worth 950 million euros, in the event of the insolvency of Elbtower KG, which is currently majority owned by Signa. This right of first refusal could make it easier for the city to complete the project without Signa – whether with city developers or with investors. The entrepreneur Klaus-Michael Kühne is mentioned again and again in this context. Hamburg’s urban development senator Karen Pein (SPD) can imagine that the Elbtower will not be completed until 2028.
The Elbtower in November 2023: Image: Reuters
Signa founder René Benko needs faster solutions for his financial needs. The hope lies in a mezzanine investor who exchanges expensive capital for little direct say. This would result in extremely high interest rates. Together with additional fees, Signa can charge loan costs of a good 20 percent annually. According to information from the FAZ, negotiations were held with such a potential investor at the weekend, but a name was not revealed. However, it is not supposed to be the financial investor Attestor mentioned by other media last week, who acquired the majority of the holiday airline Condor in 2021.
The term mezzanine is derived from the Italian word for mezzanine and is not clearly defined. These are usually debt capital, i.e. loans that are not secured by first priority and are therefore almost as at risk of default as equity. That’s why mezzanine is also called a hybrid between equity and debt capital. It could close the financing gap at Signa because the first-lien loans secured by real estate are with banks, which would receive the property for sale in the event of no interest or loan repayment. Among these lenders are also German state banks such as Helaba with, according to information from the FAZ, a mid-three-digit million amount, followed by LBBW, Bayern LB and Nord LB – all of which also have a three-digit million amount.
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