Unlock Editorial Digest for Free
FT editor Roula Khalaf chooses her favorite stories in this weekly newsletter.
Creditors of one of the main companies of René Benko's Signa Group claim that the company's bankruptcy was caused by “illegal” financial transactions and not by the slump in the European real estate market.
Their claims contradict early findings from the company's administrators and statements from Signa's management and shareholders, which have so far blamed rising interest rates and its impact on property valuation models for the collapse of the luxury real estate groups.
Signa Development Selection is one of the three core entities of the Signa Group. The company was declared bankrupt on December 29 and owes more than 2.6 billion euros.
SDS supervisory officials acknowledged “significant concerns” from creditors in a report on Monday, noting that “cash outflows, upstream and sidestream payments totaling more than €600 million” were being urgently investigated. The administrators' report added that recovering the missing cash would be a “decisive factor” in repaying creditors.
Administrators of SDS have now recommended that its assets be placed into a trust.
Because of the way Benko set up Signa Group, which owns stakes in Selfridges and Chrysler Buildings, it fell apart after the bankruptcy as creditors and shareholders fought over collateral and liabilities in a network of more than 1,000 different companies.
Benko, a paper billionaire in his early 30s, filed for personal bankruptcy in Austria last week. It is unclear what assets he still has access to through a series of opaque family trusts controlled by his mother in Austria and Liechtenstein.
SDS holds Signa's portfolio of development assets: construction projects that the company hopes to sell shortly after completion. The company is the most cash-generative part of the Signa group.
Meanwhile, Signa Prime and Signa Holding own the group's prized trophy assets: dozens of high-end addresses in Europe's richest cities, from designer shopping districts to ultra-luxury hotels.
A 35-page analysis prepared by a large international SDS creditor group and seen by the Financial Times said there were “clear contradictions” in the company's reasons for bankruptcy.
They claim the company should have survived as a going concern based on funds raised from a successful asset sale in 2023, but instead was used as a cash box for the rest of the Signa empire.
Taking the sale of the BEAM project in central Berlin as an example, creditors pointed out that the sale proceeds worth more than 100 million euros did not appear to be reflected on SDS's balance sheet as expected, while the project's debt still existed.
New analysis by creditors identified a further €297m of funds flowing to six entities, which they claim do not fall within the SDS's legal definition of “corporate boundaries”, that is, “[a] A clear violation of the Austrian capital maintenance rules.”
The money was paid in 2023 when analysis showed that it was already known to SDS management that the company was under financial pressure and conserving capital was important, as reported in the company's financial update.
“This led . . . to the conclusion that SDS funds were likely to have been deliberately misappropriated,” the analysis said.
The Financial Times previously reported that SDS provided an unexplained loan of 300 million euros to entities controlled by the Benko family foundation, and this capital outflow is not included in this.
A spokesman for the creditor group declined to comment. Lawyers for Signa Development and Benko and a spokesman for their administrator did not respond to requests for comment.
#Creditors #Signa #collapsed #due #illegal #financial #dealings
