Property giant Signa set to make further insolvency filings – sources

By Matthias Inverardi, John O’Donnell and Alexander Hübner

FRANKFURT (Reuters) -Austrian property group Signa could see more of its units file for insolvency as soon as this week as the real estate empire is running out of cash, people with direct knowledge of the matter said on Monday.

The group, controlled by an Austrian magnate but whose business is anchored in Germany, held talks with Elliott Investment Management to try to raise funds, according to one of the people, describing the company’s scramble for cash.

Signa did not immediately respond to a request for comment. Elliott declined to comment.

Signa, which is an owner of New York’s Chrysler Building as well as scores of high-profile projects and department stores across Germany, Austria and Switzerland, is controlled by Austrian magnate Rene Benko.

Its difficulties make the group the biggest potential casualty of a European property crash, triggered by the steepest rise in borrowing costs in the euro’s 25-year history, that has hit Germany and Sweden hardest.

On Friday, Signa Real Estate Management filed for insolvency in a local court in Berlin, according to a court filing.

That signaled a worsening of conditions for the group, which, according to another person with knowledge of the matter was seeking to secure fresh financing to see it through until year end.

The group, which values its assets at 27 billion euros ($29 billion), is made up of numerous subsidiaries.

It has borrowed heavily from banks, including Switzerland’s Julius Baer, which disclosed that it had an exposure of more than 600 million Swiss francs ($678 million).

Others too have lent, including Austria’s Raiffeisen Bank International.

Earlier this month, one of its executives, Hannes Moesenbacher, identified a large exposure to a client of 755 million euros, referring to Benko’s group, according to a person with knowledge of the matter.

BayernLB and Helaba, the regional state-backed banks for two of Germany’s most affluent states, Bavaria and Hesse, have each lent the group several hundreds of millions of euros, said people with knowledge of the matter.

Construction has already halted at six Signa sites in Germany, including one of the country’s tallest buildings, encompassing plans for nearly 200,000 square meters in space.

It had been making steady progress this year on the planned 64-story Elbtower skyscraper in Hamburg, until it stopped paying the builder, who halted work.

Germany, Europe’s largest economy, is in the middle of a property crisis after a sharp rise in interest rates and building costs forced some developers into insolvency and put deals and construction on hold.

The real estate sector was a bedrock of Germany’s economy for years, accounting for roughly a fifth of output and one in 10 jobs. Fuelled by low interest rates, billions were funnelled into property, which was viewed as stable and safe.

Now a sharp rise in rates has put an end to the run, tipping some developers into insolvency as deals freeze and prices fall.

Weakness in commercial real estate in the United States as offices remain empty after the pandemic and the struggles of major property developers in China have focused global attention on the sector.

($1 = 0.9168 euros)

($1 = 0.8855 Swiss francs)