Signa overthrew the European monarchy in defeat

VIENNA/FRANKFURT (Reuters) – Real estate and retail giant Cigna filed for bankruptcy on Wednesday after its latest attempts to secure new financing failed, making it the biggest victim yet of Europe’s property market collapse.

The group, controlled by Austrian businessman Rene Benko, is the owner of the Chrysler Building in New York as well as several high-profile projects and department stores throughout Germany, Austria and Switzerland.

Signa Holding’s debts amounted to around €5 billion, according to creditor protection associations KSV1870 and Alpenländischer Kreditorenverband (AKV), with 42 employees and 273 creditors affected by the measures.

The multi-billion-euro group, whose reach extends from Germany’s most famous department store, KaDeWe in Berlin, to the country’s largest high street chain Galeria and a skyscraper project, is set to send ripples through the continent’s beleaguered property sector.

Austrian Chancellor Karl Nehammer sought to downplay the importance of the company’s collapse. “What’s really important is that all those who have invested here, especially the banks, remain stable,” he told reporters. “This is critical.”

Research by analysts at Austria’s Raiffeisen Bank International, one of Signa’s biggest lenders, warned earlier this week that its difficulties could lead to a broader decline in commercial property prices if it starts selling properties.

Cigna Holding in Austria said it would apply to the Vienna court to initiate insolvency proceedings and begin reorganizing the group.

She added, “The goal is the orderly continuation of business operations… and the sustainable restructuring of the company.”

Signa was majority owned and controlled by Banco, although a number of other wealthy individuals, including Austrian industrialist Hans Peter Hasselsteiner, had smaller stakes.

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The holding company’s bankruptcy is expected to spread across the group, although one important subsidiary was still struggling to survive.

Recent investor talks to provide liquidity to its subsidiary Signa Prime – of which Signa Holding is the majority shareholder – are still ongoing, although their chances of success are slim, a person close to the matter said.

Signa Prime Selection is the largest company in Signa’s real estate division, with total assets worth €20.4 billion.

Other minority investors in the main division include German industrial billionaire Klaus-Michael Kuhn, Germany’s RAG and the French Peugeot family.

The unit focuses on investing in real estate in prime inner-city locations in Austria, Germany, Switzerland and northern Italy.

The sharpest rise in borrowing costs in the euro’s 25-year history has caused property prices to fall in Germany, where most of the group’s business is based.

A view of the Signa Holding brand at its headquarters in Vienna, Austria, November 6, 2023. REUTERS/Leonard Voyager/File photo Obtaining licensing rights

“It will be a rude awakening for investors as they see monetary policy default eventually spreading,” said Anika Gupta, equity strategist at investment management firm Wisdom Tree.

Cigna attributed its problems to external factors affecting its real estate business and pressure on high street shopping.

Signa’s massive real estate holdings in Germany in mostly central locations mean its bankruptcy could leave deep scars in the country’s cities, said Sven Carstensen of Bulwiengesa, a real estate consultancy.

The group, whose assets are estimated at 27 billion euros ($29 billion), consists of several subsidiaries. JP Morgan estimated its liabilities at about 13 billion euros.

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Its bankruptcy leaves a string of unfinished construction projects across Germany, including one of the tallest buildings in the country.

Construction stopped

Signa was making steady progress on its planned 64-story Elbtower skyscraper in Hamburg, until it stopped paying the construction company, which halted work. Construction has also stopped at five other Signa sites in Germany.

Dozens of banks, insurance companies and pension funds over the years have financed and invested in Cigna’s companies, bond sales prospectuses and Cigna’s bid seen by Reuters.

Cigna borrowed heavily from banks, including Swiss bank Julius Baer, ​​which disclosed exposure of more than 600 million Swiss francs ($678 million).

Financial ties are particularly strong in Austria, where Signa was founded and headquartered.

Raiffeisen Landesbank Niederoesterreich-Wien, Raiffeisen Landesbank Oberoesterreich and Erste Group are also among the banks that have had exposure to Signa.

Earlier this month, Hans Mossenbacher, an executive at Raiffeisen Bank International, identified a €755 million exposure to a client, referring to Banco Group, according to a person familiar with the matter.

Both Bayern LB and Helaba, state-backed regional banks in two of Germany’s wealthiest states, Bavaria and Hesse, lent the group several hundred million euros, people familiar with the matter said.

The real estate sector has been a cornerstone of the German economy for years, accounting for nearly a fifth of GDP and one in 10 jobs. Because of low interest rates, billions have been transferred into real estate, which was seen as stable and safe until the recent rise in borrowing costs.

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

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(Additional reporting by Harry Robertson in London, Alexander Hübner in Munich and Matthias Inverardi in Düsseldorf – Prepared by Muhammad for the Arabic Bulletin) Editing by Katherine Evans, Thomas Janowski and Kirsten Donovan

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Emma Victoria reports on mergers and acquisitions across Europe, and has previous experience at Mergermarket, Bloomberg, The Daily Telegraph and Deutsche Presse Agentur.

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