Austria: Signa Group in great troubles, banks risk billions in losses

The large Austrian conglomerate Signa, which owns, among other things, the Selfridge retail group and prestigious real estate worldwide, and which was an Austro-German financial giant, had been in deep trouble for weeks now, problems that became apparent after Signa Sport, the sports goods retail division, went bankrupt.

Now the German subsidiary Signa Real Estate Management Germany has filed for bankruptcy at the Berlin-Charlottenburg District Court. This was first reported by the ‘Spiegel’ . It is a subsidiary of the Signa subsidiary that develops particularly prestigious real estate projects in Berlin, Hamburg, and Munich, among others.

The ‘Signa Real Estate Management Germany GmbH’ involved is a pure service subsidiary that controls the development of real estate projects. It ‘does not own any real estate projects but only provides services for real estate companies’. On the asset side, there are therefore only just under ten million euros of tangible assets, probably office furniture and the like. It recently recorded a turnover of EUR 54 million with 139 employees. The company follows the group’s construction sites in Germany.

This is an additional problem for the group headed by entrepreneur René Benko, which is rumoured to soon go bankrupt as a whole, another sign of the real estate crisis affecting Germany and Austria. The entrepreneur has moved mainly to the Middle East to find the necessary funds for the rescue, and there is also talk of a negotiation, unsuccessful for now, with PIF, the Saudi public investment fund.

But so far this search has been unsuccessful, and there is talk of a strong possibility of bankruptcy. There is talk of a bank exposure of EUR 2.2 billion, two-thirds with Raiffeisen Bank International (RBI) and UniCredit’s Bank Austria. Usually these reports are underestimated compared to the actual size of the problem.

This bankruptcy would be another blow to the solidity of the Austro-German banking system, all at a time when the real estate bubble is deflating very quickly, dragging the credit system into the crisis.