René Benko has driven the growth of his Signa Group for years. But now the holding company could collapse like a house of cards. There are great hopes for Arndt Geiwitz. The reorganizer and insolvency administrator made a name for himself by rescuing Galeria Kaufhof and winding up the Schlecker drugstore chain. At the same time, Benko is reportedly trying to get a financial injection from Saudi Arabia’s sovereign wealth fund. Questions and answers about the possible showdown:
Who is René Benko?
The Austrian investor has long been considered a model entrepreneur. In Germany, his Signa Group is best known as the owner of the Galeria Karstadt Kaufhof department store chain. His holding, which has grown rapidly over the years, includes real estate and trading interests worth billions. Forbes estimated his fortune at $5.6 billion in 2021, making him the third richest Austrian.
Benko directly and indirectly holds around 50 percent of the shares in Signa Holding through its foundations. However, he does not hold any official position, but is simply chairman of the so-called advisory board, an advisory body. Nevertheless, all the threads should still come together with him.
Benko’s recipe for success: well-known donors who invested a long time and a lot of money in him, as well as influential political friends. His investors include entrepreneurs such as the Austrian billionaire and Strabag boss Hans-Peter Haselsteiner and logistics billionaire Klaus-Michael Kühne. Institutional investors such as the RAG Stiftung are also on board. Influential Austrian politicians such as ex-Chancellors Alfred Gusenbauer and Sebastian Kurz sit on the Signa Holding advisory board.
Where does Benko have his fingers in?
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, which is under construction in the Hanseatic city (the project is now on hold due to a lack of money). Also the so-called Old Academy in the pedestrian zone in Munich (there are construction delays here too) and the Golden Quarter, 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 pearls like the KaDeWe are bundled in the Signa Prime Selection. There is also Signa Real Estate, which is also the owner of 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 shops, has already filed for bankruptcy. Benko is also involved in the media business. In 2018, Signa Holding took over shares in the Austrian daily newspapers Kronen Zeitung and Kurier. Benko also invests in digitalization. Signa holds 70 percent of the Hoods.de agency.
Why is the Signa Group in trouble?
Like so many companies in the industry, Signa is struggling under the rapidly rising interest rates. The problem is loan financing. The ongoing projects are often debt-financed and executed at variable interest rates, which are based on the European reference interest rate Euribor, which has risen sharply since the beginning of 2022. In January last year, the 3-month rate was minus 0.57 percent, most recently at 3.95 percent (as of November 1, 2023).
Allegedly, loans totaling 1.3 billion euros will come due this year and will therefore have to be paid or refinanced. In addition, real estate prices have fallen. Signa had to estimate the value of the real estate portfolio correct downwards, so the properties can only be borrowed at lower prices. Signa’s most important real estate subsidiary Signa Prime Selection posted a loss of around 1 billion euros in 2022, according to its annual financial statements. Signa was made more difficult by the burden of supporting the ailing department store subsidiary Galeria.
The indications that there are liquidity bottlenecks in the group, with its almost incomprehensible branches and financial flows, have been increasing for months. The shareholders had to continually inject more money, which required capital increases. A capital increase in the summer apparently only worked with a lot of hassle. Investors are distancing themselves. The sports trading subsidiary Signa Sports United (SSU) recently had to file for bankruptcy because Benko withdrew an 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?
Insolvency administrator Arndt Geiwitz in March of this year before the creditors’ meeting of Galeria Karstadt Kaufhof.
(Photo: picture alliance/dpa)
The 54-year-old auditor and tax advisor is the man on whom great hopes now rest. He has relevant previous experience as a restructuring and insolvency administrator. Geiwitz has made a name for itself in the past in the insolvency proceedings of the department store chain Galeria and the drugstore chain Schlecker. Apparently Geiwitz’s highest priority was always the continuation of a company, never its liquidation.
What exactly should or can Geiwitz do?
Geiwitz has received a consulting contract from Signa. According to the business and tax consultancy SGP Schneider Geiwitz & Partner, his job is to “familiarise himself and gain an overview of the group of companies”. If things go as the shareholders demand, he will soon slip into a different role: Benko should transfer his voting rights to him. Geiwitz would then chair the advisory board, he would be a trustee for Benko and the direct contact for shareholders and investors.
However, quick solutions cannot be expected. According to insiders quoted by the “FAZ”, it will take weeks just to bring light into the darkness of the company’s extensive empire. Geiwitz will not take on the role of insolvency administrator if Signa goes bankrupt. He is too partial for that because of Galeria Kaufhof and his proximity to Benko.
Can Geiwitz turn things around?
Questionable. The insolvency proceedings at Schlecker ultimately cost 25,000 “Schlecker women” their jobs. He had investors on hand at the time, but in the end they all turned him down. Saving Galeria Kaufhof is only a conditional recommendation. The chain has already had to go through two bankruptcies 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 cash register is said to be at low tide again.
What’s next?
At the moment, even Arndt Geiwitz probably doesn’t know whether Signa can still be saved. There are too many unanswered questions: Will Benko still find donors? How deep is Benko’s nested empire actually in the mess? The only thing that is certain is that Benko is still in the ejector seat. The shareholders continue to demand his resignation as chairman of the Signa Holding advisory board. Unlike what was announced last week, an agreement on this has not yet been sealed. Benko is still making his withdrawal subject to conditions, and the shareholders are at odds. Internal discussions are ongoing.
Elsewhere there is also supposedly talk and work being done on 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 three-digit million financial injection 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 linked to a contract murder of journalist Jamal Khashoggi in Istanbul in 2018 and has since been known as the “Blood Sheikh”.
It is unclear whether Geiwitz is informed about these discussions or not. The Swiss “SonntagsZeitung” writes that it was Benko’s solo effort and that no one at Signa knew anything about it. The Saudis are said to have invested hundreds of millions of euros from PIF in Signa. Accordingly, they have a concrete interest in protecting their investment. But time is running out. According to Business Insider, money must come from Riyadh by early next week.