For years, the most important financiers of René Benko’s Signa Group included German insurers, including the who’s who of the industry: companies like Ergo, Signal Iduna and R V. Signa insiders reported back in the fall that there were sometimes “huge tickets” of loans – even before the wave of bankruptcies in Benko’s empire really started and hit his most important real estate companies shortly after Christmas.
Now it turns out that the German insurance industry’s involvement in Benko’s conglomerate was even more extensive than previously known – and with it its risks. This emerges from a current response from the Federal Ministry of Finance to a parliamentary question. According to the knowledge of the financial supervisory authority Bafin, 46 insurance companies are “exposed to the Signa Group,” says the letter to Bundestag member Jessica Tatti (non-attached, formerly Left Party), which is available to Capital.
For nine of the affected insurers, the commitment to Benko’s group accounts for more than one percent of their investment portfolio, writes Finance State Secretary Florian Toncar (FDP). The peak value is 2.2 percent. In this case, an insurer has invested more than two percent of its investments with Benko and has to worry about repayment after major parts of the company go bankrupt. However, Bafin does not see any “significant threat” from any of Signa’s financiers from the insurance industry, emphasized Toncar. The Ministry of Finance did not provide any information about the overall level of the industry’s commitment or the insurers affected.
In addition, two federal pension institutions are also affected by the difficulties of the Benko conglomerate, as the Ministry of Finance admitted. These are the pension fund for German theaters (VddB) and the pension fund for German cultural orchestras (VddKO). Both institutions “are among the financiers of three properties in which Signa companies are involved,” said Finance State Secretary Toncar in response to a further question from MP Tatti.
However, these real estate financings are “extensively secured with first-class land charges”. Furthermore, the institutions are also invested in a special real estate fund that is the buyer of a Signa property that is under construction. Overall, the commitment of the two pension institutions amounts to less than one percent of their capital investments, wrote Toncar in its answer from the end of December, which is available to Capital.
The two federally owned pension funds’ commitment to Benko came about via a detour: the VddB and the VddKO have their assets managed by the Bavarian Supply Chamber (BVK). BVK, in turn, is one of the investors from Germany who have maintained a close and capital-intensive business relationship with Benko for years. According to Capital information, the BVK has long ago granted loans for the Berlin luxury department store KaDeWe as well as the Tyrol department store in Innsbruck and the luxury hotel Park Hyatt in Benko’s Golden Quarter in Vienna, which run until the 2030s. The KaDeWe is worth 450 million euros, while the properties in Austria, which were among the first major projects of the real estate investor Benko, are worth more than 100 million euros each.
The Bavarian Ministry of the Interior recently pointed out to state parliament member Tim Pargent (Greens) that for all Signa properties financed by BVK, “the market values significantly exceed the loan amounts”. However, the question is to what extent the values calculated so far can be realized on the market given the chaos at Signa. After central Signa companies filed for insolvency, some properties have to be sold within a short period of time in order to bring money into the empty coffers – possibly with consequences for prices.
The “Financial Times” estimated the German insurance industry’s involvement with the Benko Group in December at a volume of more than 3 billion euros. The report mentioned more than half a dozen companies that financed the Tyrolean real estate investor’s conglomerate, including almost all well-known industry giants such as Allianz, the Munich Re subsidiary Ergo, R V and Signal Iduna. The number of 46 insurers that, according to Bafin’s findings, have risks from commitments to the Signa Group suggests that many smaller companies from the German insurance industry have also become involved with Benko.
“Little by little, the extent of the Signa fiasco is becoming visible,” said Bundestag member Christian Leye, who was the left-wing parliamentary group’s economic policy spokesman until it was dissolved and is now vice-chairman of the BSW association (Alliance Sahra Wagenknecht). “But it shouldn’t be surprising that the German insurance industry has succumbed to the allure of the alleged model entrepreneur Benko. Even today’s Chancellor Olaf Scholz has supported Benko in the past, despite all the warning signs.” Leye added that it was questionable whether the Signa bankruptcy was solely a matter of insolvency law. The political dimension also offers a lot of explosive material, for example with regard to the commitment of the then mayor of Hamburg, Scholz, to the prestigious Signa Elbtower project: “Does Mr. Scholz have other skeletons in the basement?” asks Leye.
Capital had already reported in November how Benko had been able to rely heavily on German state banks, insurers and pension institutions for years to meet its immense need for capital. These were primarily loans for long-term real estate projects, but also partly participation certificates and other financial instruments. During the long phase of zero interest rates, the returns that Benko promised his lenders in the real estate sector also appeared attractive to institutional investors who were not allowed to take major risks. Many of the loans are secured by land and real estate, while other investments are not.
In addition, individual insurers also invested in significant – now insolvent – Signa companies with equity capital: R V Versicherung holds five percent of the shares in the two most important real estate subsidiaries, Signa Prime Selection and Signa Development Selection. Competitor LVM recently holds a 2.9 percent stake in Signa Prime Selection. Last week, both Signa subsidiaries submitted applications for restructuring proceedings under self-administration to the Vienna Commercial Court. The management wants to continue the company. What is clear, however, is that they will have to sell real estate and development projects on a large scale and will definitely shrink – with corresponding consequences for the value of the shares.
Most Signa financiers from the insurance industry did not want to comment on their involvement when asked by Capital. Signal Iduna, which according to the “Financial Times” is said to have lent the group almost 1 billion euros, pointed out upon request that its loans were secured by mortgages. The Dortmund insurer emphasized that “no loan defaults” are currently expected from the Signa Group. But even in the event of “possible loan defaults” there are currently no “significant risks” for your own company. Signal Iduna is involved, among other things, as a lender in Benko’s prestigious Elbtower project in Hamburg.
Note: This article first appeared on “Capital”.
