Signa moved more than €300mn to René Benko-linked entities before insolvency

A Signa Group company transferred more than €300mn to two entities controlled by the family of its Austrian founder René Benko before the collapse of the property giant, according to financial documents reviewed by the Financial Times.

Signa Development, one of the three companies that oversaw the conglomerate’s investments — which include a stake in New York’s Chrysler building — lent €125mn to Laura Finance Holding GmbH and another €190mn to Laura Holding GmbH, as part of large outflows of money last year, the documents show.

Both recipients are subsidiaries of the Innsbruck, Austria-based Laura Foundation. While its beneficiaries are not disclosed, the foundation is controlled by Benko’s mother, Ingeborg, according to Austrian public records. Benko’s daughter is called Laura.

The failure of Signa, whose portfolio also includes stakes in London’s Selfridges and Berlin’s KaDeWe, has been a high-profile sign of the stress across the European commercial property market following a rise in interest rates. But lenders facing billions of losses are now raising questions over how the complex, leveraged web of companies was run under the effective control of its 46-year-old politically connected billionaire founder.

The Financial Times spoke with Signa creditors and advisers to the group and reviewed three years of internal accounts, shareholder presentations, and its non-public insolvency filings for Signa Development to substantiate information about the transfers.

Details of the transfers to the Laura entities only came to light on December 29, when after weeks of silence, creditors received documents from Signa’s lawyers relating to insolvency proceedings and the group’s balance sheet. Creditors have been given no explanation of what the transfers were for, people close to the lenders said.

The administrator expects to recover none of the money, according to Signa Development’s insolvency filing.

As well as the payments to the Laura companies, Signa Development transferred hundreds of millions to other Signa group entities.

The way Benko ran the Signa group meant large sums of money were often lent between corporate entities in its structure, without explanation to investors. That practice ramped up in the last year as the Signa Group’s finances came under increasing strain.

Signa Development’s management and administrator did not respond to requests for comment.

Benko did not respond to a request for comment via his personal corporate email address.

Under the Austrian “self-administration” insolvency procedure, Signa Development’s own management team is overseeing the restructuring of the company. Erhard Grossnigg, an insolvency expert, has been brought on to the company’s board to help. A third-party administrator, Andrea Fruhstorfer of the Austrian law firm EcoLaw is supervising the process.

The Signa Group’s collapse is one of the most complicated corporate bankruptcies in Europe. The conglomerate never published consolidated accounts, and its three holding companies have different administrators, management teams and creditor groups.

Before its collapse, Signa estimated its property assets to be worth €28bn.

Christof Stapf, the administrator appointed to oversee the wind-down of Signa Holding, the group’s main company, said last month that the group’s organisation chart, which he had only just finished reviewing, ran to 46 A3 pages.

The group comprises more than 1,000 corporate entities. Signa Development alone sits on top of more than 250 of them.

Benko held no formal managerial role in Signa after being convicted for bribery by an Austrian court in 2013. However, he exercised control through a shareholding structure ultimately linked to his family foundations that made him one of only a handful of people able to understand the functioning of the group.

The line between his personal interests and those of the company was often blurred. Privately controlled shell companies linked to the Laura Foundation invested in developments alongside other Signa entities, and Signa Holding funded personal properties used by the tycoon and his private jet, according to corporate organisation charts seen by the FT.

Over the years Benko succeeded in bringing on board dozens of external shareholders and lenders at various levels of the Signa structure.

Signa Development creditors — which include dozens of European banks, owners of profit participation notes bondholders and third-party shareholders — were blindsided by disclosures in November about the company’s health, said several of them, speaking under the condition of anonymity.

Signa Development disclosed long-overdue accounts for the first half of the year to them early that month, revealing only €32mn left as cash equivalents.

Following the successful sale of several large assets in the second quarter, creditors had been expecting to see a figure nearly 10 times that sum, people close to them said.

In its first-quarter earnings, Signa Development had also told investors the company had a €1bn capital cushion.

In explaining where the cash had gone, Signa Development said that it had lent hundreds of millions of euros “through the ordinary course of business cash management operations with Signa Group entities”.

Signa Developments parent company, Signa Holding, filed for bankruptcy four weeks later.

On December 11, Signa Development’s board announced it had fired the company’s chief executive, Timo Herzberg, with immediate effect, for what it claimed were “gross violations” of his duties. Herzberg did not respond to a request for comment.

Signa Development itself entered insolvency three weeks later — on the final business day of the year.