German insurers, including Munich Re and Allianz, have invested more than three billion euros in billionaire René Benko's ailing real estate empire. In addition to borrowing from banks such as Julius Baer and Unicredit, Benko's Signa Group's network of companies has also relied heavily on financing from more than half a dozen insurers, according to documents obtained by the Financial Times. (FT) and by people who know the details first hand. According to these insiders, about a third of this exposure is not backed by collateral. “So this will be extremely painful for some insurers,” one of the people said.
Signa Holding, the parent company that includes Selfridges in London, the Chrysler Building in New York and KaDeWe in Berlin, filed for bankruptcy last month. The company had accumulated a debt mountain of five billion euros by the end of September, most of it in the first nine months of this year.
Benko did not quantify the total debt of companies within the Signa Group, but according to people familiar with the structure, the group's individual companies have borrowed more than twice as much money. Many of those companies, but people familiar with the business, said more bankruptcies are expected in the coming days.
Insurance companies lent money to Signa because of the regulatory and interest rate environment, among other reasons, according to a person familiar with the situation. "Heavily regulated banks have been unable or unwilling to do certain types of business because of their capital requirements, while insurance groups have been drowning in cash in the era of ultra-low interest rates," the person said.
A significant portion of Signa Group's debt was provided by non-bank financial companies such as Dortmund insurer Signal Iduna. This is a company with twelve million customers that is primarily active in health and life insurance. Signal Iduna loaned Signa almost a billion euros, people with direct knowledge said.
The insurer did not want to comment on the extent of its involvement, but said that it does not expect “significant credit losses” as its loans are “largely” backed by collateral in the form of real estate in prime German city locations.
Munich Re's main insurance business, Ergo, made loans worth about 700 million euros, while Germany's fourth-largest insurance group, R V, lent 500 million euros, more than half of which is uncollateralized, according to documents and people familiar with the matter people.
Allianz provided 300 million euros in loans for Signa's purchase of a high-rise in central Berlin in 2018, while mid-sized Dortmund insurer Volkswohl Bund made a 250 million euro commitment.
Ergo, R V, Allianz and Volkswohl Bund declined to comment. Signa did not respond to a request for comment.
German financial regulator Bafin told the FT it was monitoring the situation, but added that "in most cases" the risk was negligible compared to the total assets of individual insurers and that it did not expect a "significant threat" to any of the affected groups .
As well as lending on certain Signa properties, some insurers also took stakes in companies in the group, according to documents seen by the FT. Mid-sized German insurer LVM holds a 2.9 percent stake in Signa Prime Selection, one of the two companies that own the majority of Signa Group's assets. A significant portion of LVM's €300 million Signa commitment is uncollateralized, according to people familiar with the company's commitment and documents obtained by the FT. LVM declined to comment.
This article, translated from the "Financial Times", first appeared here in the business magazine "Capital", which, like stern, is part of RTL Deutschland.