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Europe’s Signa Toppled in Property Rout

Property and retail giant Signa declared insolvency on Wednesday after last-ditch attempts to secure fresh funding failed, making it the biggest casualty so far of Europe’s property crash.

Controlled by Austrian magnate Rene Benko, the group is an owner of New York’s Chrysler Building as well as several high-profile projects and department stores across Germany, Austria and Switzerland.

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

The multi-billion-euro group, whose reach spans from Germany’s best-known department store, Berlin’s KaDeWe, to the country’s top high-street chain Galeria and a skyscraper project, is set to send ripples across the continent’s embattled property sector.

Austrian chancellor Karl Nehammer sought to play down the significance of the company’s collapse. “What’s really important is that all those who invested here, especially the banks, stay stable,” he told journalists. “That’s critical.”

Research by analysts at Austria’s Raiffeisen Bank International, one of Signa’s biggest lenders, warned earlier this week that its difficulties could trigger a wider drop in commercial property prices if it started to offload properties.

Signa’s holding company in Austria said it would apply to a Vienna court to begin insolvency proceedings, and start a reorganisation of the group.

“The aim is the orderly continuation of business operations … and the sustainable restructuring of the company,” it said.

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

The insolvency of the holding company is expected to cascade through the group, although one important subsidiary was still fighting to stay alive.

Last ditch investor talks to provide liquidity for subsidiary Signa Prime – in which Signa Holding is majority shareholder – are still ongoing, although these have only a small chance of success, a person close to the matter said.

Signa Prime Selection is the largest company in Signa’s real estate division, with a gross asset value of 20.4 billion euros.

Other minority investors in the Prime division include German industry billionaire Klaus-Michael Kuehne, Germany’s RAG foundation and France’s Peugeot family.

The unit focuses on investment in properties in prime inner-city locations in Austria, Germany, Switzerland and northern Italy.

The steepest rise in borrowing costs in the 25-year history of the euro has caused property prices to tumble in Germany, where much of the group’s business is anchored.

Source : Reuters

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