Benko’s Lenders in Focus as Signa Begins Turnaround Effort

(Bloomberg) — As Rene Benko steps aside to allow a restructuring expert to sift through his sprawling real estate empire valued at €23 billion ($25 billion), his lenders are watching closely to see the impact of new plans being developed to rescue the group.

Credit Suisse has emerged as a main backer of a 550 million-franc ($610 million) loan for department stores in Switzerland, according to people familiar with the matter, while credit hedge fund Arini is a key holder of Signa bonds maturing in 2026. They’re both part of a wide group that includes investors from the Middle East and Thailand, as well as regional banks in Germany, Austria and Switzerland, that have handed billions of euros to fund a property empire spanning New York’s Chrysler Building and the Selfridges department store in London.

The complex setup of Benko’s Signa Holding GmbH may complicate the efforts of restructuring expert Arndt Geiwitz, hired this week to replace the billionaire founder, to prepare a turnaround plan by the end of November. It also means that any writedowns on the debt will likely ripple through many institutions.  

Take, for instance, Benko’s investment in the Globus luxury department store chain in Switzerland. Signa bought a 50% stake in 2020, with the rest owned by Thailand’s Central Group, an investor who has done several such deals with the Austrian. 

Julius Baer Group Ltd had initially provided a bridge loan for the deal. It was refinanced in 2021 by the debt arranged by Credit Suisse’s Swiss unit, with the Globus flagship store in Zurich serving as collateral, according to people familiar with the terms who asked not to be identified discussing internal information. Credit Suisse kept 35% of that financing, worth about 190 million francs at the time, the people said. The rest was syndicated out to more than half-a-dozen smaller Swiss lenders including several cantonal banks. 

Filings of the Luxembourg-based investment vehicle that owns the property back up the loan transactions, without naming the banks. Those filings also show that the property was valued at 757 million francs at the end of last year, and had about 544 million francs in debt.

While Credit Suisse, now owned by UBS Group AG, is looking at the situation closely, the loan is not yet in restructuring, one of the people said. Julius Baer no longer holds any of the original debt, that person said. 

Credit Suisse and Julius Baer declined to comment. Signa didn’t respond to a request for comment.

Signa is among firms at the epicenter of a slump in European commercial real estate. Over two decades of aggressive expansion, Benko acquired prime properties including major retail stores in top locations across Europe. Rising interest rates and plunging valuations are now threatening that empire, with his Signa Prime unit, which holds the Globus stake, recording a revaluation loss of €1.16 billion last year. 

Globus occupies prime spots in Zurich, Bern and other cities and has roots stretching back to the 19th century. The brand is part of Benko’s Swiss real estate portfolio that includes eight assets, among which is a Zurich four-star hotel.  

Julius Baer also originally helped to finance Signa’s acquisition of UK department store Selfridges with Central Group, with a £300 million multi-currency loan facility, according to corporate filings. Central Group refinanced that facility in August with a six-month shareholder loan of around €360 million, according to other people familiar with that financing. The loan will be repaid either with cash or by equity conversion, the filing said. 

Central Group, owned by the Chirathivat family, has been doing business with Signa since at least 2015 when it bought a majority stake in KaDeWe Group, the operator of Signa’s three German luxury department stores including the namesake store in Berlin. 

Some of the larger lenders with exposure to Benko have been asked by the European Central Bank to write them down or set aside provisions, people familiar with the matter told Bloomberg in August. Not all of his lenders faced such actions and any hits to earnings probably won’t be big enough to eat into the banks’ capital reserves, people familiar with the matter have said.

“The quality of the Signa Prime portfolio is outstanding,” Geiwitz said in a statement on Friday when commenting on a new appointment to Signa Holding’s management board.

–With assistance from Marton Eder, Stephanie Bodoni, Jeff Black and Katie Linsell.

(Adds Signa comment from press release in last paragraph)

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