Prime and Development: Trust Solution Instead of Bankruptcy at Cigna

Restructuring managers Norbert Abel of Signa Prime and Andrea Frostorfer of Signa Development announced the voting results at Prime and Development's creditor meetings on Monday afternoon – the two will serve as trustees. It was initially said that a majority of head and voting capital had been achieved in Prime.

Shortly after, Signa Development also got the green light for the trust's restructuring plan. This now paves the way for asset sales in as controlled a manner as possible over the coming years. She continued: “All usable assets will be made available to creditors to meet their claims.”

Reorganization plans must be confirmed by the court

At least 30 percent of claims must be paid via this solution. But in the event of bankruptcy, the property had to be sold as quickly as possible, which, according to the assessment of restructuring manager Abel and also the creditors' protectors, would have led to a reduction in the creditors' share.

The Vienna Commercial Court still has to confirm the restructuring plans. To this end, the shareholders of the two companies must also participate in the restructuring plans, said Gerhard Weinhofer, of the creditor protection association Creditreform. The two companies have until the end of June to fulfill the insolvency requirements.

“The most economically logical solution”

“The vote was very clear. There was a large surplus of votes that approved,” said Karl-Heinz Götze of the Credit Protection Society 1870 (KSV1870) after a meeting of Signa Prime's creditors at the Commercial Court. A large majority was also achieved when it came to liabilities. But the majority of Signa Development's creditors were also in favor of dissolving the trust.

“Some creditors may have agreed to the restructuring plan with a little stomachache,” Weinhofer said. “Ultimately, this is the most economically logical solution.” Dissolving the trust leaves more time to make the best possible use of the property as well as to pursue liability and repudiation claims. “It is clear that in the end Signa will only exist on paper.”

The Republic voted against the trust model

The majority of creditors voted differently from the Republic. Chief Financial Prosecutor Wolfgang Peschoorn, who acts as the republic's representative, said before the vote that he would not say yes to dissolution of confidence. Among other things, Peschoorn said at the meeting that he doubted there would be enough liquidity available for the trust process.

Possibility of obtaining an emergency loan to provide liquidity

However, reports spread on Monday that Hamburg billionaire Klaus-Michael Kuhn could give Signa Prime an emergency loan and thus provide liquidity for the guarantee proceedings. The agency quoted a person familiar with the situation, whose name it did not mention, that there are discussions about a loan worth more than 100 million euros.

Bloomberg also quoted several people familiar with the matter. Insiders said the funds will provide liquidity to cover bills and continue construction.

About €7.5 billion of claims have been recognised

Signa's series of bankruptcies is the largest in the history of the Austrian economy. To date, 475 creditors have registered claims totaling €12.8 billion against bankrupt luxury property company Cigna Prime, with around €5.9 billion currently recognized by the insolvency administrator.

In addition to the Park Hyatt and the ElbTower Hotel, which is currently 100 meters tall from 245 metres, Cigna Prime's portfolio includes Berlin luxury department store Kadewe, London's Selfridges and several other properties, such as the Golden Quarter and the Tyrol section. Shop in Innsbruck.

To date, claims totaling €2.3 billion have been registered against Signa Development. Of this amount, approximately €1.5 billion has been recognized so far. Signa Development's portfolio included the development of real estate projects outside the best locations in Austria and Germany as well as in South Tyrol.