Creditors of the two most important companies in the bankrupt Signa property group are pushing to oust management and hand over control to independent auditors, over fears their interests are being sidelined in favour of a tightly knit group of investors based in Austria.
Groups representing more than two dozen international lenders – including insurers, banks and bondholders – with claims totalling more than €3 billion told the Financial Times that Signa properties worth hundreds of millions of euro were being sold or transferred to related parties with barely any transparency about the liquidation process.
Investors have been struggling to quantify potential losses since the group, which co-owned Selfridges (which in turn owns Irish department stores Brown Thomas and Arnotts) in London and the Chrysler Building in New York, unravelled late last year.
Although Signa Holding, the group’s parent company, is now in the hands of an independent administrator, the two subsidiaries that own the bulk of Signa’s assets are still being run by existing management: appointees of Austrian property tycoon René Benko and his co-shareholders.
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Austrian insolvency law allows for a six-month process of “self administration” where management can try to work through an insolvency themselves, with a view to saving the businesses.
One lender to Signa described it as “one of Europe’s most arcane restructuring tools” and said the “lack of visibility” in the process was highly damaging to Austria’s reputation and deeply concerning for parties to which Signa owes money.
Signa Prime and Signa Development have embarked on a process of rapid asset sales since the group started unravelling late last year. The creditors spoken to by the FT questioned who the assets were being sold to, and for what price.
More than a dozen German insurance companies filed a petition with Vienna’s district court last week, demanding an end to Signa Prime’s self-administration.
The letter states that the company’s management was “not acting in the best interest of the creditors” and had taken a series of decisions that were creating “the imminent danger of causing significant harm to creditors”.
Earlier this month, Signa Prime said that it was seeking bids for three properties in Vienna – the Park Hyatt hotel, the upmarket shopping area Goldenes Quartier and the constitutional court – as well as the department store Kaufhaus Tyrol in Innsbruck.
Signa documents show the four properties were valued at €1.2 billion late last year, but people familiar with the matter warn that selling them now may lead to discounts of 50-70 per cent.
“This fire sale can easily destroy hundreds of millions of euros in value,” a person familiar with the concerns warned.
Creditors of Signa Prime said in a letter to the court that they had repeatedly suggested mandating “an internationally renowned real-estate expert” to oversee a “co-ordinated and transparent liquidation of the portfolio”. It was “telling” these proposals had been “constantly ignored”, they said.
Signa Development creditors have also formally petitioned for an independent administrator to take control of the company.
One large bank lender to Signa Development said the lack of communication from the company’s management had been “shocking”.
Another creditor said they had repeatedly sought clarity on huge money flows from Signa Development to other Signa Group entities, as well as entities controlled by Benko’s private family foundation, but had been ignored.
“Management are speaking with shareholders in these companies – and often the two are the same – and acting as if they can simply shut out the people they actually owe money to outside of Austria,” the creditor said.
Another creditor said repeated calls to enlarge a Signa Prime creditors’ committee had been ignored. The body that needs to approve critical decisions consists of only three individuals: one representative of the Austrian government and delegates of two Austrian creditors’ associations. “None of them is a real-estate expert,” the creditor said.
The management of Signa Prime and Signa Development – and the insolvency advisers engaged to oversee the self-administration process – did not respond to requests for comment. – Copyright The Financial Times Limited 2024
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