The management of Signa Prime, a key company of fallen real estate mogul René Benko, must now proceed through bankruptcy after the Austrian Supreme Court ruled against a proposed restructuring plan. Creditors had hoped for a five-year secured sale, but the plan was deemed unfeasible. The insolvency administrators confirmed the failed restructuring, leading to liquidation proceedings. Austrian officials raised concerns about potential asset misappropriation, advocating for transparency and investigation into the broader Signa group’s activities.
The liquidation of Signa Prime, the primary company associated with the fallen real estate magnate René Benko, must now proceed through bankruptcy proceedings. The restructuring plan, approved by a majority of creditors in March under a trust model, has been deemed unviable by the Austrian Supreme Court in a final ruling. The judges upheld a prior ruling from July, which indicated that the restructuring plan could not be fulfilled and even the funds for procedural costs were not attainable.
As a result, the insolvency administrators have stated that the attempt to restructure Signa Prime has failed. The company, which holds Benko’s key luxury properties, will now be liquidated via bankruptcy.
“Unrealistic from the Start”
“Unrealistic from the Start”
At first glance, the trust solution appeared to offer a significant advantage: it allowed the liquidation process to take five years instead of just two, as in standard bankruptcy proceedings. This provided a more controlled approach, potentially benefiting from a better market environment. The majority of creditors hoped for higher returns than in an immediate “fire sale,” a prospect that the insolvency administrators supported by suggesting creditors might recover around 30% of their claims. In a liquidation scenario involving forced sales, however, they anticipated a much lower recovery rate.
The Republic of Austria, represented by the Financial Prosecution and also a creditor of Signa Prime, opposed this approach from the outset. Wolfgang Peschorn, president of the Financial Prosecution, argued that even with a trust-based liquidation, forced sales would be necessary to address ongoing cash flow needs. He further anticipated that a bankruptcy procedure would enhance transparency in the convoluted Signa empire, allowing for investigations into asset shifts within the corporate group over recent years.
Consequently, Peschorn not only denied approval of the plan but also initiated legal action against it, resulting in his ultimate victory in court. He stated this week in a detailed interview that the proposed 30% recovery rate was unattainable. Developments since the vote on the restructuring plan demonstrated that the values used in those calculations could not be sustained. “In our view, these 30% were unrealistic from the beginning and are now more unrealistic than ever,” explained the Republic’s legal representative.
The judges of the lower court agreed, noting that given the recognized claims by the insolvency administrator amounting to approximately 6 billion euros, a recovery rate of about 24% could be achieved at best. The Supreme Court now supports this assessment.
Peschorn Sees Lack of Commitment to Investigation
Peschorn Sees Lack of Commitment to Investigation
The removal of self-administration and the initiation of bankruptcy proceedings now truly provide an opportunity to scrutinize any internal asset transfers that may disadvantage the creditors over the past decade. In the ORF interview, he criticized the ongoing lack of commitment to exposing the largest bankruptcy in Austrian history. Without a comprehensive understanding of the Signa conglomerate and Benko’s activities, there is a risk that a parallel entity, dubbed “Signa 2,” could emerge, redirecting assets into a new structure, possibly including foundations linked to Benko.
A bankruptcy procedure under judicial supervision may increase the likelihood of examining the inner workings of the Signa empire. Notably, Peschorn has also challenged the restructuring plan of the smaller Signa Development and has received a favorable ruling from the Vienna Higher Regional Court. The Supreme Court’s decision on this appeal is still pending.