Contrary to the claims of the insolvency administrator and public statements made by Signa’s executives and shareholders, the main entities of René Benko’s Signa Group, creditors allege, fell into insolvency due to fraudulent financial transactions, not a slump in the European property market. They dismiss the earlier assertion that the luxury property group’s downfall was a result of rising interest rates affecting property valuation models.
Among the central entities of Signa Group, Signa Development Selection (SDS) was declared insolvent on 29th December with debts exceeding €2.6 billion. In response to the creditors’ substantial concerns, the supervisory administrator of SDS produced a report admitting that cash outflows and other payments exceeding €600 million were urgently under investigation. The recovery of this lost cash is pivotal in offsetting creditors, as stated in the report.
The administrator of SDS is now advocating for its assets to be shifted into a trust. Mr Benko has structured the Signa group, which has stakes in Selfridges (owner of Irish store chains Brown Thomas and Arnotts), the Chrysler building, and many more, in a way that has led to fracturing post-collapse. Shareholders and creditors are competing over more than 1,000 different company’s assets and liabilities.
Mr Benko, who earned his billionaire status in his early 30s, has recently declared personal insolvency in Austria. There is ambiguity surrounding what assets are still under his control, presumably through an array of obscure family trusts administered by his mother in Austria and Liechtenstein.
The most lucrative part of the Signa group, SDS, retains Signa’s portfolio of development assets, including construction projects intended for quick sale post-completion. In contrast, Signa Prime and Signa Holding are the owners of the group’s highly valuable trophy assets, including a variety of luxury addresses from designer shopping districts to premium hotels in Europe’s richest cities.
However, a comprehensive 35-page analysis conducted by a leading group of international SDS creditors, reviewed by the Financial Times, found numerous inconsistencies in the reasoning provided for the company’s insolvency.
In a recent examination, creditors have cast doubt on the financial operations of Signa Development Solutions (SDS). They maintain that SDS could have remained operational in the long-term based on the funds garnered from successful asset liquidations in 2023. However, they allege the finances were misappropriated for other segments of the Signa group.
They cited the sale of the BEAM project stationed in the heart of Berlin. The sale reportedly drew in over €100 million, however, the earnings from this deal were not corroborated in SDS’s record of accounts as anticipated. Meanwhile, the residual debt from the project continued to linger within the accounts.
The creditors’ fresh overview found an additional €297 million of outgoings to six firms that, according to them, do not fall within SDS’s “corporate boundary” as defined by law. This, they say, violates Austria’s Capital Maintenance regulations.
These payments, dating back to 2023, were dispensed when the firm’s management was aware, as documented in SDS’s economic briefings, that the company was under financial pressure and it was crucial to conserve working capital.
“This points to the high probability that SDS’s funds were intentionally misused as per the assessment”, was a statement from the report.
This takes the total to €300 million inclusive of the previously unaccounted loans provided by SDS to outfits run by Benko’s family foundation as reported earlier by The Financial Times.
The group of creditors’ spokesperson opted not to react to the situation, while the representative for Signa Development and Benko and the administrator’s spokesperson did not respond to requests for a response.
Stay tuned to Business push alerts to receive the most recent news, reports and commentary directly on your phone. You can find The Irish Times on WhatsApp for the latest updates. Subscribe to our Inside Business podcast that goes live every week. You can listen to the most recent episode here.