Signa crisis: René Benko's luxury department store group KaDeWe is preparing to file for insolvency

When the series of bankruptcies in investor René Benko's Signa Group began last November, KaDeWe boss Michael Peterseim made a demonstrative effort to remain calm.

Signa crisis: René Benko's luxury department store group KaDeWe is preparing to file for insolvency

When the series of bankruptcies in investor René Benko's Signa Group began last November, KaDeWe boss Michael Peterseim made a demonstrative effort to remain calm. The group, which manages the luxury department store business in Berlin's KaDeWe, the Alsterhaus in Hamburg and the Oberpollinger in Munich, is "safely positioned," he reassured. The turbulence would "have no impact on us. We can clearly rule that out.” After all, Signa is only “a minority shareholder” – which sounded as if the Austrians were just an irrelevant small shareholder.

The KaDeWe Group was also unaffected by the bankruptcy of Benko's Galeria Karstadt Kaufhof department store chain almost three weeks ago. Next week the management wants to meet in Rome for a regular meeting. Actually on the agenda: business as usual.

But now the chaos that has been going on for months in Benko's real estate and trading group is also affecting business in the luxury department stores. According to information from Capital, the KaDeWe Group is preparing its own bankruptcy filing. This should be submitted at the beginning of next week, according to company circles. The insolvency proceedings should be filed in Berlin, where the group, which has its official headquarters in Essen, does the vast majority of its business. The KaDeWe Group has not responded to a request from Capital for comment on the information since Friday morning.

So far, the insolvency proceedings of numerous companies from the Signa Group's real estate sector have already been brought together at the Charlottenburg District Court under the leadership of insolvency administrator Torsten Martini from the Görg law firm. These also include companies that rent real estate to the KaDeWe Group.

In view of possible conflicts of interest between the real estate and retail sectors, the insolvency court is therefore likely to appoint an insolvency administrator for the upcoming proceedings at the luxury department store group who has not yet been involved in the Signa proceedings.

Many years ago, Benko had separated the trading business in the luxury department stores in Berlin, Hamburg and Munich from the normal branches of the then independent Karstadt department store chain and incorporated it into a separate company. Signa holds 49.9 percent of the shares in the KaDeWe Group, which recently had sales of around 800 million euros. The majority of 50.1 percent has been held by the Central Group from Thailand, the country's largest operator of shopping malls, since 2015. The billionaire Chirathivat family, most recently the fourth richest family in Thailand, is behind the Central Group.

The Central Group, which also owns the Italian luxury department store chain La Rinascente, has been a close business partner of Benko for many years. Together with "the Thais", as the joint venture partner is often called by Signa managers, Benko has also taken over the Globus department stores in Switzerland and the British department store chain Selfridges for several billion euros since 2020.

The current three locations of the KaDeWe Group should actually be expanded by 2025 to include the Carsch-Haus in Düsseldorf, which is currently under renovation, and a new luxury department store in Vienna called Lamarr.

Since the situation at Signa worsened, the financially strong company from Thailand has repeatedly been seen as a buyer who could take over Signa's shares in the shared luxury department stores.

When the collapse of Benko's conglomerate began last November, Central Group assured that it intended to support all of its luxury businesses in Europe "regardless of the position of our joint venture partner." It would "ensure that they receive the necessary support in order to be able to continue operations as usual,” it said.

The Central Group had already been involved in Benko's real estate business in Germany: at the end of 2022, the Thais from the Signa Group bought almost half of the KaDeWe property in Berlin - a deal that was intended to help Benko plug its financial holes.

In this respect, it is quite surprising that the KaDeWe Group is now taking the step into insolvency. In corporate circles it is said that the Central Group was no longer willing to provide fresh money. It is also conceivable that the Thais want to use the bankruptcy to take over Signa's shares in the KaDeWe Group more cheaply - or as a means of exerting pressure in negotiations with the insolvency administrators who are in charge on the Signa side.

The KaDeWe Group's own insolvency proceedings offer the opportunity to renegotiate the exorbitantly expensive rental agreements with the Signa real estate division. Similar to Galeria, however, there are different interests between the previous trading and real estate divisions of Signa and the respective insolvency administrators.

At the beginning of this week, the two subsidiaries of Benko's most important real estate company Signa Prime Selection, which own the Hamburg Alsterhaus and the Munich Oberpollinger and which rent these houses to the KaDeWe Group, had already filed for insolvency. The company owning the KaDeWe property was not yet insolvent until recently. The Central Group may be speculating on taking over the KaDeWe Group's properties cheaply as part of the various insolvency proceedings.

German taxpayers could also be affected by the bankruptcy of the KaDeWe Group. At the beginning of the Corona crisis in 2020, the company received a default guarantee from the states of Berlin and Hamburg as well as the federal government for a bank loan worth up to 90 million euros.

At that time, management had internally described the state guarantee as a “once in a lifetime gift from the German state”, as the “Bild” newspaper recently reported. The working capital loan granted by the major bank BNP is due this year. If the KaDeWe Group can no longer repay it, the public sector will have to step in.

This article first appeared in the business magazine "Capital", which, like stern, is part of RTL Deutschland.