Gold-rush mood

Benko’s Signa makes the cash registers ring

Investor Rene Benko

(Bild: APA/Signa - Are, APA/Helmut Fohringer, Krone KREATIV)

The biggest bankruptcies in Austrian economic history also highlight some of the weaknesses in Austrian insolvency law: for many weeks now, there has been a kind of gold-rush atmosphere in the Austrian insolvency administrator scene, because: If it says Signa on an insolvency, then it not only contains debts in the millions or billions, but also assets in most cases. 

At least in the core companies. And this is financially interesting for the respective insolvency administrators appointed by the competent court: according to the Insolvency Code, their fees are based on the amount of the quota that is accepted by the creditors in the restructuring process. And the proceeds from the sale of the assets.

Jackpot restructuring proceedings
Restructuring proceedings are particularly lucrative for administrators: Here - as shown in detail in the example of the non-transparent Benko empire - the management appointed by the financial juggler remains at the helm. The so-called restructuring administrator merely takes on the role of a super-supervisory board for three months. In contrast to traditional bankruptcy proceedings, a quota of 30 percent is provided for in such restructuring proceedings. The proceedings must be completed within a few months. 

If a restructuring plan is accepted, as in the example of Signa Prime, the restructuring administrator receives his fee immediately after the creditors' approval and court confirmation. The money flows immediately. The creditors, on the other hand, have to hope that the promised 30 percent will actually be paid.

(Bild: EPA)

The millions in fees
In the case of Signa Prime Selection AG, the restructuring administrator Abel Rechtsanwälte is collecting a reported 22 million euros for three months of work, according to Krone-Infos. In the case of Signa Development Selection AG, which has also been insolvent since the end of December 2023, the law firm received around seven million euros from the restructuring administrator Fruhstorfer. This is despite the fact that, at the end of the day, achieving the promised quota of 30 percent depends on the prices at which the Signa properties can be realized in the coming years.

Only for the restructuring administrator and the creditor protectors will the money flow safely and quickly, for the Signa creditors the principle of hope prevails. However, the insolvency administrator who will carry out the sale will make a considerable cut when selling the properties.

The inventory, such as this doormat, has already been auctioned off.

(Bild: Aurena.at)

The bet on sales
Signa Prime's restructuring process is not only a bet on the hopefully profitable property sales in the future; it is also not without a certain curiosity. In mid-March, the creditors' meeting voted by a majority in favor of accepting the restructuring plan - despite all the warnings from the Finanzprokuratur. There was not even enough money to pay the restructuring administrator.

As the company lacked liquidity, the restructuring administrator had to defer his fee claim for the time being. The insolvency administrator's fee can only be paid once the loan from the venture capitalist Attestor, which will bring in 100 million, has been made available. This means that 22 of the fresh 100 million, which apparently could only be raised with great difficulty, have already been spent again. 

The profit of the creditor protectors
 Critics point to another circumstance: if the creditors agree to restructuring proceedings and there is no bankruptcy, which the Republic had pushed for, the so-called creditor protectors will also profit. Their fees are linked to the remuneration of the insolvency administrator.

Creditor protectors collect considerably more in restructuring proceedings than in traditional bankruptcy proceedings. This may explain why Wolfgang Peschorn, who as representative of the Republic had pushed for bankruptcy and unsparing transparency, was hardly listened to in the confidential creditors' meetings. In the interests of the many creditors who had been ripped off, the Republic's lawyer had called for the company to be broken up and liquidated, including a complete clarification of all dubious transactions in the Benko conglomerate.