Three more Signa companies file for insolvency as Moody's warns on banks

The suspended Elbtower construction site in Hamburg, Germany. Photographer: Maria Feck/Bloomberg

Three more divisions of the European real estate and retail group Signa filed for insolvency on Wednesday, another turn for the worse for the embattled Austrian company that has become the biggest casualty so far of Europe's property crash.

The divisions - Signa Financial Services GmbH, Signa REM Germany Rent GmbH, and SCAx GmbH - filed for insolvency with a court in Berlin, according to filings.

Just last week, the property giant, founded in 1999 by business mogul, Rene Benko, filed for insolvency in Vienna, with the aim of managing its restructuring as a debtor-in-possession. 

In 2021, it entered a consortium with Thai company, Central Group to buy Irish luxury retailer, Brown Thomas Arnott's through its parent company, Selfridges Group.

Shielding Brown Thomas and Arnotts stores from the fallout, Thailand's Central Group, owned by one of Asia's wealthiest families, the Chirathivats, assumed a majority shareholder position in Selfridges, Brown Thomas and Arnotts last month as financial challenges within Signa deepened.

Speaking last week, a spokesperson for Brown Thomas Arnotts said, "The news today on Signa Holding does not change anything for Brown Thomas Arnotts as we trade independently of any support from shareholders."

"We welcomed the news earlier this month that Central Group is to become the majority shareholder in the Selfridges Group clearly demonstrating their unwavering support for the business. At Brown Thomas and Arnotts, its business as usual."

Benko's property group is also an owner of New York's Chrysler Building as well as several high-profile projects and department stores in Germany, Austria and Switzerland.

The Vienna-based holding company - with debts of around €5bn - filed for insolvency last week in a dramatic stumble in the conglomerate's two-decade history that underscored the dimming prospects for the broader property sector.

Separately, the credit rating agency Moody's said Signa's insolvency is a drag on the credit quality and profitability at some Austrian, German and Swiss banks.

Calling Signa's structure "opaque and complicated", Moody's said in a report on Wednesday that most of Signa's bank loans were secured, which would soften the blow.

"However, the declining valuations of the underlying pledged assets ... imply additional risks, increasing potential losses in the work out of defaulted loans," Moody's said.

Non-performing loans and risk costs are likely to rise in the fourth quarter of this year, it said.

The Moody's report adds to concerns voiced by the European Central Bank, which has said that euro zone's sinking commercial property sector could struggle for years, posing a threat to the banks and investors which financed it.