Barely a week after Austrian property billionaire René Benko sold central Europe’s popular Kika/Leiner chain of furniture stores, the retailer is filing for bankruptcy.
In a statement on Wednesday, Kika/Leiner’s newly installed management said that after a careful review, it had been decided the company required a radical economic restructuring to save it as a viable business.
Half of its workforce will be axed in the next few weeks, and 23 of its 40 stores will be permanently closed.
Benko’s Signa Group announced the sale on June 1, for a price reported in the Austrian media of about €400mn — significantly less than the €500mn paid for the group in 2018. Signa insiders said the company had nevertheless pocketed a €300mn gain on its investment, having already sold off Kika/Leiner’s eastern European business in 2018, and a number of valuable properties owned by the group over the past few years.
The decision to file for bankruptcy has caused uproar in Austria and once again thrown a spotlight on the complicated financial affairs of Benko and his sprawling property empire — which includes joint ownership of the iconic departments stores KaDeWe in Berlin and Selfridges in London, as well as the Chrysler building in New York.
The swashbuckling 46-year old Austrian is already under public pressure in Germany, where the country’s largest department store chain, Galeria Karstadt Kaufhof, also owned by Signa, was put into bankruptcy in November.
Rumours have meanwhile continued to dog Signa about the state of its finances, amid rising interest rates and a sharp fall in consumer spending. The group’s financial structure is opaque and involves a huge web of holding companies and trusts.
Benko is also embroiled in a high-profile Austrian investigation into government corruption.
Signa acquired Kika/Leiner in 2018 in a transaction that was publicly praised by the then Austrian chancellor Sebastian Kurz as a bold move by Benko to save Austrian jobs.
In the entire period of Signa’s ownership of Kika/Leiner, the chain has failed to turn a profit, however.
Critics have accused Signa of having sought to extract value from the company’s property portfolio with little concern for it as an actual business.
As part of the transaction finalised last week, Kika-Leiner’s remaining properties were sold to the Austrian developer Supernova, leaving the retailer’s operating company to try and fend for itself.
“Separating from Kika/Leiner was not a decision taken lightly,” said Christoph Stadlhuber, Signa chief executive.
Signa said rumours that the sale had been hurried through in order to shore up Signa’s finances were completely untrue.
The group had been in talks with credible buyers for the chain since the beginning of last year, it said, and more than six months of due diligence had been done by the group ahead of the agreement announced last week.
“The decision on the exit was strategic — any rumours that Signa sold the business just to raise cash are completely wrong.”
The property development group had liquidity reserves of “substantially more than half a billion Euros at the moment”, it added.
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