The power struggle over real estate juggler René Benko’s Signa Group, which is in ruins, is now having a huge impact on its creditworthiness. US rating agency Fitch has downgraded Signa Development AG, one of Benko’s four investment companies, to ‘high risk’.
Since the beginning of this week, according to ‘Handelsblatt’ it is only sufficient for a credit rating of ‘CCC’ (‘substantial risks’). This means that “no failures are to be expected unless developments are favourable”. Previously, Signa Development AG was rated ‘B’ (‘highly speculative’), which meant that ‘if the situation worsens, bankruptcies are likely’.
“Challenges also in the field of liquidity”
To justify the downgrade, the rating agency cited figures from the company’s interim report dated June 30, 2023, in which Signa Development announced that it “faced challenges, including with regard to its liquidity situation.”
Billions in losses, construction freeze, bankruptcy
Sister company Signa Prime Selection already suffered a loss of billions last year because buildings under construction had to be devalued. Construction of Hamburg’s Elbtower and other projects came to a standstill. In addition, according to Handelsblatt, Signa has canceled financial obligations for a number of its online stores in the Signa Retail investment division, which led, among other things, to a bankruptcy filing at subsidiary Tennis-Point.
“Unpaid suppliers and bank financiers”
Signa Development, which Fitch now classifies as risky with assets of around three billion euros, does not have the same size of projects as Signa Prime Selection, which has around 20 billion euros. But “unpaid suppliers and bank financiers” could “mutually contaminate and disrupt” Signa companies, the rating agency warns.
Fitch sees a ‘risk’ that Signa Development has diverted its own resources to other parts of the Signa Group. This is evident from the increase in ‘other financial claims’, which increased by 215 million euros in the first half of 2023. These were described in the half-yearly report as interest-bearing “loans to indirect shareholders”.
Illustrious names as shareholders
According to a list from mid-July 2023, not only Benkos Signa Holding is involved in the Signa Development group, but also other leading companies and entrepreneurs, the newspaper said. Shareholders at the time included the private family foundation of Austrian industrialist and ex-Strabag boss Hans Peter Haselsteiner, ex-chancellor Alfred Gusenbauer, Union Investment, the RAG Foundation, Roland Berger and ex-Metro boss Erwin Conradi.
Source: Krone
I’m Ben Stock, a journalist and author at Today Times Live. I specialize in economic news and have been working in the news industry for over five years. My experience spans from local journalism to international business reporting. In my career I’ve had the opportunity to interview some of the world’s leading economists and financial experts, giving me an insight into global trends that is unique among journalists.
