The big cleanup at Signa
Renovator Arndt Geiwitz faces a mammoth task
By Diana Dittmer
November 9, 2023, 7:44 p.m
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After days of fighting for leadership at Signa, the real work now begins. Renovator Arndt Geiwitz is supposed to ensure order. Sorting through the complicated network of hundreds of companies will take months. But time is running out. There’s already a threat of trouble.
René Benko is gone and, after a long struggle, Arndt Geiwitz is finally the apparent central authority at Signa. He is supposed to clear up the chaos. This allows many – especially the shareholders, investors and banks involved – to breathe a sigh of relief. What seems like a liberation is, however, far from the end of the drama. Because the real work is only now beginning. Geiwitz and other external consultants who rush to provide support will have to comb through all business areas in the coming weeks in order to get an overview of the financial difficulties in the holding company.
Caring work awaits Geiwitz and his team. The only person who knows his way around the thicket of the corporate network of 7,000 individual companies is probably Benko. He won’t be any help – nor has he been so far. The work of Geiwitz So it probably has a lot to do with literally poking around in the fog.
At the moment, one thing reigns supreme at Signa: uncertainty. Since the company is not listed on the stock exchange, no detailed, current balance sheets are available. “Nobody knows how the company is really doing,” said an insider. “Nobody knows how high the total debt is.” What makes matters worse is that the question of Geiwitz’s powers has not been fully clarified. Although Benko is no longer chairman of the company’s important controlling advisory board, the Benko family’s private foundation is still Signa’s largest shareholder.
An alleged request for a three-month standstill agreement between shareholders, creditors and investors suggests that Geiwitz knows what herculean work he has undertaken. According to an insider quoted by Handelsblatt, the renovators want to give themselves time to sort through the numbers and identify possible properties for sale. Only then will it be clear how much money the group needs, they say. However, the paper quotes another insider as saying that a standstill agreement would be “wishful thinking for some investors.” A capital injection of between 200 million and 400 million euros is allegedly being negotiated.
What are Benko’s properties worth?
Signa’s financial cushion has melted dramatically under the pressure of rising interest rates, as a look at the annual financial statements of the Signa companies reveals. According to “FAZ”, for example, Signa Prime Selection AG only earned 75 million euros last year after 400 million euros the year before.
Signa Holding, with its proliferation of companies, has not just one, but literally many construction sites. Numerous real estate projects in development constantly need fresh capital for operations and ongoing financing. The problem is that loans have become more expensive and banks have become more cautious. In addition, the European Central Bank (ECB) has demanded high write-downs from some banks on investments in the Benkos Signa Group, which has not made it any easier for Benkos Signa to obtain fresh capital.
Construction work on large construction projects, such as the Elbtower in Hamburg, is already on hold. The problem is that the 46-year-old, hungry for success real estate tycoon from Austria built up his group of companies with the help of financially strong investors who have increasingly distanced themselves and recently refused further capital.
The question is: Given falling real estate prices and shrinking demand for office space, what is his real estate empire, on which the entire Signa Holding is built, even worth today? Benko himself has always described his luxury properties as “unique”. Geiwitz is also convinced of this. The quality is “excellent,” he said. “The development prospects of the development projects, which are located in the top locations of German-speaking cities, are very good.” It remains to be seen whether this is wishful thinking and whether it will stand up to the scrutiny of critical eyes. The next few weeks will bring clarity as to how high the group’s debt level actually is and whether the assets cover this gap.
The department store group Galeria Karstadt Kaufhof, which has already had two insolvency proceedings, is also waiting. None other than Geiwitz accompanied the two proceedings. The bad news: The tide in the coffers is said to be low again. The Verdi union has therefore already called on Geiwitz to commit to the department store giant with its around 12,500 employees. “We expect the reorganizer Geiwitz to now provide clarity as quickly as possible about what prospects the employees have and how big the possible effects of the comprehensive consolidation of the Signa Group he has announced will be,” said a Verdi spokeswoman for the “Westdeutsche Allgemeine Zeitung “.
Trouble also threatens from bond investors
Dark clouds, waste and time pressure also exist elsewhere in Benko’s empire. An outstanding bond from the subsidiary Signa Development Finance with a volume of 300 million euros is causing discussion. According to “Handelsblatt”, mutual funds specializing in high-yield bonds such as DWS and the asset managers Schroders and Invesco are invested. It was only last week that they learned that the company only had 32 million euros in cash in the past quarter, after 125 million euros in the previous quarter. The fear: The money that was supposed to be available to repay the bond could have been used to repay shareholder loans.
According to an investor, the company should receive money from realized real estate projects. However, according to the latest figures, it is feared that “the money has left the unit”. The bond does not mature until 2026. But many investors are said to have already sold the interest-bearing securities on a large scale because of the mysterious outflow of funds. The price has fallen by over 60 percent since the middle of last week. According to Handelsblatt information, Signa Development has scheduled an investor call on the topic for next Thursday.
A lot depends on what comes to light in the next few weeks and months. One thing is certain: the mere fact that Geiwitz Benko enjoys great trust and receives a lot of praise does not mean the all-clear. The path to “long-term solutions” that “herald a comprehensive consolidation for the company,” as Geiwitz put it, could be paved with surprises.