Europe's Signa toppled in property rout
Business
Europe's Signa toppled in property rout
VIENNA/FRANKFURT (Reuters) - Property and retail giant Signa declared insolvency on Wednesday after last-ditch attempts to secure fresh funding failed, making it the biggest casualty so far of Europe's property crash.
Controlled by Austrian magnate Rene Benko, the group is an owner of New York's Chrysler Building as well as several high-profile projects and department stores across Germany, Austria and Switzerland.
The multi-billion-euro group, whose tentacles reach from Germany's best-known department stores, Berlin's KaDeWe Group, to the country's top department store chain Galeria and a project to build a skyscraper, is set to send ripples across the continent's embattled property sector.
Austrian chancellor Karl Nehammer sought to play down the significance of the company's collapse. "What's really important is that all those who invested here, especially the banks, stay stable," he told journalists. "That's critical."
Research by analysts at Austria's Raiffeisen Bank International, one of Signa's biggest lenders, warned earlier this week that its difficulties could trigger a wider drop in commercial property prices.
Signa's holding company in Austria said it would apply to a Vienna court to begin insolvency proceedings, and start a reorganisation of the group.
"The aim is the orderly continuation of business operations ... and the sustainable restructuring of the company," it said.
Signa was majority owned and controlled by Benko, although a number of other wealthy individuals, including Austrian industrialist Hans Peter Haselsteiner, had smaller stakes.
The steepest rise in borrowing costs in the 25-year history of the euro has caused property prices to tumble in Germany, where much of the group's business is anchored.
Signa blamed its problems on external factors affecting its property business and pressure on high-street shopping.
"It will be a little bit of a rude awakening for investors as they do see the lags in monetary policy eventually catching on," said Aneeka Gupta, an equity strategist at investment manager WisdomTree.
The group, which values its assets at 27 billion euros ($29 billion), is made up of numerous subsidiaries. JP Morgan estimated its liabilities at 13 billion euros.
Its insolvency leaves a trail of half-finished construction projects across Germany, including one of the country's tallest buildings.
