Peschorn's refusal

Republic will not agree to Signa restructuring

Wolfgang Peschorn (right) is the Republic's lawyer. He represents the interests of the Republic in the insolvency proceedings of René Benko's Signa and kika/Leiner.

(Bild: Gerhard Bartel, APA/HELMUT FOHRINGER, AFP, Krone KREATIV)

Monday is a decisive day for the future of the Signa Group founded by Rene Benko - in the afternoon, the creditors of the real estate companies Signa Prime and Signa Development will vote on the restructuring plans submitted to the Vienna Commercial Court. Wolfgang Peschorn, who represents the interests of the Republic of Austria as President of the State Financial Procurator's Office, has already made it clear: He will not approve the restructuring plans.

The restructuring plans presented are aimed at achieving higher proceeds by selling the properties under a fiduciary model than in the event of bankruptcy. The liquidity required for a slow sale "is currently not in sight", said Peschorn on Monday's Ö1 "Morgenjournal". Even if the restructuring plan is accepted, the company would have to be sold under pressure. "Only by selling can the company keep its head above water in the coming weeks."

Bankruptcy proceedings now looming
If the restructuring plans are rejected, bankruptcy proceedings are envisaged instead of restructuring proceedings under self-administration. In both scenarios, there will not be much left of the company in the long term; all properties and projects are to be sold.

Bankruptcy will bring more clarity according to Peschorn
Peschorn once again criticized the lack of transparency of the Signa Group. Bankruptcy would "definitely" bring more clarity. For example, money could have been taken out of the companies and then reinvested in new projects, he suspects. An investor could now appear "who is now acting as a creditor with the money that was once in the companies".

Bankruptcy also more advantageous for law enforcement authorities
Peschorn believes that criminal investigations are possible. "And I also hope that the criminal authorities will start targeted investigations here as soon as possible." In this case too, bankruptcy proceedings "would undoubtedly be advantageous for the prosecution authorities because a trustee in bankruptcy can work very well with them".

The Signa bankruptcy series is by far the largest insolvency in Austrian economic history. Creditors have filed record claims of around 10.8 billion euros against the insolvent luxury real estate company Signa Prime, of which only just under 3.1 billion euros have been recognized by the administrator according to the latest restructuring report. EUR 2.3 billion in claims have been filed against Signa Development, of which EUR 1.3 billion have been recognized to date. Signa Prime's portfolio includes, for example, the luxury department store KaDeWe in Berlin, Selfridges in London and the Elbtower in Hamburg, which has been stopped at 100 of its 245-meter height, as well as many other properties, such as the Goldenes Quartier and the Park Hyatt Hotel in Vienna and the Tyrol department store in Innsbruck. Signa Development develops real estate projects outside the prime locations in Austria and Germany as well as in South Tyrol.

The future of the Elbtower in Hamburg, which is currently under construction, is now uncertain.

(Bild: APA/AFP/Axel Heimken)

Creditors should receive 30 percent according to the restructuring proposal
According to the restructuring plan proposed by Signa Prime and Signa Development, creditors are to receive at least 30 percent of their recognized claims within two years and all realizable assets are to be transferred to a trustee for liquidation or to satisfy creditors. In the view of the insolvency administrators, the trustee restructuring plans on offer lead to a significantly higher quota expectation than in the break-up scenario and they therefore recommend that creditors accept the trustee restructuring plans.

The advantage of the trustee restructuring is that the restructuring administrators would gain time to achieve higher prices when selling the projects and companies, explained the creditors' representative Karl-Heinz Götze from Kreditschutzverband von 1870 (KSV1870) in the Ö1 "Morgenjournal". In the event of bankruptcy, they would start selling immediately.

30 percent quota very optimistic according to Peschhorn
In Peschhorn's opinion, however, it is "not at all certain that this 30 percent quota will exist if the restructuring plan is accepted". The quota is only being held out as a prospect and could perhaps only be achieved under very optimistic assumptions.

The plans require both a majority of creditors and a majority based on the amount of the claims. According to Götze, it is not possible to predict how the votes will turn out today.