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German insurers together with Munich Re and Allianz have amassed greater than €3bn of publicity to the struggling property empire owned by actual property billionaire René Benko.
The community of companies in Benko’s Signa group not solely borrowed from banks together with Julius Baer and UniCredit, but additionally relied closely on funding from greater than half a dozen insurers, in keeping with paperwork reviewed by the Monetary Instances and folks with first-hand information of the small print.
The folks added that a few third of this publicity was not backed by any collateral. “For some insurers, this will probably be extraordinarily painful,” one of many folks mentioned.
Signa Holding, the central firm within the group that owns Selfridges in London, the Chrysler constructing in New York and KaDeWe in Berlin, filed for administration final month. The corporate had constructed up €5bn in debt by the top of September, the vast majority of it through the first 9 months of this 12 months.
Benko has not disclosed the whole debt collected by companies throughout the Signa group, however folks accustomed to the construction say his different entities have borrowed greater than twice that quantity. Many firms throughout the group are nonetheless buying and selling, however folks near the enterprise mentioned additional insolvencies have been anticipated inside days.
Insurance coverage firms lent cash to Signa partly due to the regulatory and rate of interest surroundings, in keeping with one particular person accustomed to the state of affairs. “Extremely regulated banks have been unable or unwilling to do sure kinds of transactions as a result of their capital necessities whereas insurance coverage teams have been drowning in money through the period of ultra-low rates of interest,” the particular person mentioned.
A major a part of the Signa group debt was offered by non-bank monetary firms similar to Dortmund-based insurer Sign Iduna, a midsized firm with 12mn clients, primarily in well being and life insurance coverage. Sign Iduna lent near €1bn to Signa, folks with direct information of the matter mentioned.
Sign Iduna declined to touch upon the dimensions of its publicity however mentioned it didn’t count on “materials mortgage losses” as a result of its loans have been “largely” backed by collateral within the type of property in prime German metropolis areas.
Munich Re’s foremost insurance coverage enterprise Ergo offered about €700mn in loans, whereas Germany’s fourth largest insurance coverage group R+V lent €500mn, greater than half of which isn’t collateralised, in keeping with the paperwork and folks accustomed to the matter.
Allianz made €300mn in loans for Signa’s 2018 buy of a excessive rise constructing in downtown Berlin, whereas Volkswohl-Bund, a medium-sized Dortmund-based insurer, racked up a €250mn publicity.
Ergo, R+V, Allianz and Volkswohl-Bund declined to remark. Signa didn’t reply to a request for remark.
German monetary regulator BaFin instructed the FT it was monitoring the state of affairs however added that the publicity “in many of the instances” was negligible in comparison with the person insurer’s complete belongings and that it didn’t count on a “materials risk” to any of the affected teams.
In addition to offering lending for particular Signa actual property belongings, some insurers made fairness investments, in keeping with paperwork seen by the FT.
Medium-sized German insurer LVM holds a 2.9 per cent stake in Signa Prime Choice, one of many two firms that owns many of the Signa group’s belongings. A major share of LVM’s €300mn Signa publicity isn’t collateralised, in keeping with folks accustomed to the agency’s publicity and paperwork seen by the FT. LVM declined to remark.
Further reporting by Ian Smith and Cynthia O’Murchu in London