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Crisis hit Austrian property business Signa Group held talks with hedge fund Elliott Investment Management to try to secure more than €400mn of financing to save it from collapse.
Two people familiar with the discussions said no deal had been reached with Elliott and that Signa was running out of options to secure urgently needed funding.
Elliott looked closely at Signa, those people said, but had concerns about the size of the group’s debts, the complex corporate structure, the ownership of assets and the role of its billionaire founder, René Benko, who was forced off the board this month but continues to control the company via family trusts in Liechtenstein.
Signa and Elliott declined to comment. Elliott’s talks with Signa were first reported by German news outlet Der Spiegel.
Elliott is not the only investor Signa has held talks with, according to industry insiders.
Dozens of lenders to Signa across Europe are scrambling to assess the potential financial damage if Signa collapses.
On Monday Swiss bank Julius Baer said it was reviewing its private debt business after revealing a €606mn exposure — its single largest — to a “European conglomerate . . . in commercial real estate and luxury property,” which people close to the bank said was Signa.
Analysts at JPMorgan believe that Signa has more than €13bn in outstanding debts. According to two people familiar with the details, loans to several banks are already in arrears and the company is only afloat because of standstill agreements.
Many creditors say their exposures are well-collateralised by Signa’s high-value real estate portfolio.
The firm — which co-owns businesses including Selfridges in London, KaDeWe in Berlin and the Chrysler Building in New York as well as dozens of other luxury retail and commercial properties in European cities — has been struggling to meet its financial obligations all year.
Its finances have deteriorated sharply in the face of falling commercial real estate values, consumer caution and rising interest rates.
Benko has been trying to raise additional capital, turning to investors in Europe as well as the Middle East, but with little success.
On Friday, a German subsidiary of the group, Signa Real Estate Management (Signa REM), applied for bankruptcy protection in Berlin, according to a court filing seen by the FT. That follows the bankruptcy of retailer Signa Sports United last month, and last year, the restructuring of the Signa-owned Galeria, Germany’s biggest department store chain.
Signa REM managers told employees in an internal letter this weekend, published by magazine Wirtschafts Woche, that efforts to secure a rescue package for the two main parent companies of the Signa Group were ongoing with “undiminished strength”.
Those two companies, Signa Holding and Signa Prime Selection, are at the centre of a complicated network of corporate entities — with debt issued at multiple levels — that together control Signa’s €27bn European property portfolio and its €25bn pipeline of projects.
Concerned about the finances of the group, Signa’s minority investors — which include some of the best-known family offices in Europe — moved to force Benko aside earlier this month, and insisted on the appointment of an independent restructuring expert to try and save the business.
Arndt Geiwitz has been tasked by the minority investor group with trying to pull a rescue package together. Geiwitz has told the investors a solution must be found by the end of November.
A €200mn bond, held by an unknown investor, and issued by Signa Prime, is due to be repaid on Thursday.
Despite the urgency of the situation, Benko was pictured taking his private jet to Barcelona for the weekend. He spent time shopping with his wife, according to pictures published on Monday in German tabloid Bild.
Additional reporting by Arash Massoudi in London
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