The European Central Bank Urges Banks to Partially Write Off Loans to Signa Empire

The ECB has been examining banks for their business relationships with and lending to Signa for several months.

The European Central Bank (ECB) is urging banks with existing loans to the Signa empire of Tyrolean real estate investor René Benko to either partially write off these loans or to make further provisions for potential losses. This was reported by the financial news agency Bloomberg, citing insiders. The company responded calmly in a statement.

Not all of the company’s lenders are confronted with the ECB’s request, Bloomberg continues. According to the Insider agency, the resulting profit losses are in all likelihood not large enough to burden the banks’ capital reserves.

Signa secured a capital injection

At the end of July, against the background of an increasingly tense situation on the real estate market, according to company circles, Signa secured a capital injection of EUR 400 million, the German “Handelsblatt” reported. With real estate prices falling, the valuations at which the company has its properties on its books are falling. At the same time, financing costs have risen significantly due to higher interest rates. The ECB has been examining the banks for their business relationships with and lending to Signa for several months.

The company is relaxed about the report. “In the last few months, Signa has completed around a dozen successful transactions with a total volume of around two billion euros in Germany, Austria and Switzerland. Every single sale price was significantly higher than the last bank valuation,” the statement said.

Criticism after bankruptcies in Germany and Austria

The sum of the sales proceeds was 250 percent higher than the outstanding bank loans and the profit from the sales was 50 percent higher than the investment costs. The consolidated total debt of Signa Real Estate is also less than 50 percent.

Signa has repeatedly come under criticism in recent months. In Austria, the furniture chain Kika/Leiner went bankrupt shortly after being sold by the real estate group. The state is the largest creditor. In Germany, the department store chain Galeria Kaufhof belongs to Signa. The company received state aid and has gone through insolvency proceedings and has to close around a third of its branches.