It would take a writer of the caliber of Honoré de Balzac or Upton Sinclair to depict the rise and fall of real estate speculator René Benko. Benco’s holding company, Cigna, filed for bankruptcy last Wednesday. Benko is the product and embodiment of a sick society where profit and wealth are all that matters, and where even the fate and lives of ordinary people have no value.
This is the largest bankruptcy in Austrian history. However, Benko’s business activities were not limited to the Alpine region. He had business interests all over the world, especially in Germany. His downfall could cause an earthquake.
Department store chains such as Galleria (Kaufhof and Kallstadt), Globes and Selfridges, acquired by Cigna, as well as large construction sites have come to a standstill and many businesses are at risk due to missed payments. In 2022, approximately 40,000 people were employed by his Signa-owned companies worldwide. If the holding company’s huge property remains vacant, the entire city center could become deserted.
Some of the 120 banks that parked their money with Benco in hopes of making a quick profit could also be in trouble. JPMorgan estimates that Cigna owes lenders a total of at least 13 billion euros. The company owes more than 600 million Swiss francs to Swiss private bank Julius Baer and more than 750 million euros to Austria’s Raiffeisen Bank International. Switzerland’s USB, France’s Natixis, Italy’s UniCredit, Bank of China and several German state-owned banks will also be affected to the tune of hundreds of millions.
A chain reaction is occurring in the real estate industry. Mr. Benko was not the only one to amass a fortune by taking advantage of low interest rates and rising real estate prices. He was more brash and unscrupulous than the others. Rising interest rates and the resulting fall in real estate prices are hurting this model. After Cigna’s bankruptcy, it will also be difficult for real estate groups to obtain new financing.
There is currently a lot of discussion in the media about whether Cigna’s bankruptcy was foreseeable, whether Benko was a fraud who just built castles in the air, and whether criminal activity was involved. As far as is known, the prosecutor’s office has not yet investigated Mr. Benko. However, he is being charged with delaying his declaration of bankruptcy.
But regardless of trials and judgments, the same social conditions favor fraudsters like crypto guru Sam Bankman Fried and Wirecard bosses Marcus Braun and Jan Masarek. It also boosted Benko’s career.
Benko, who is only 46 years old, was able to become a billionaire in such a short time because the entire political system has long focused on enriching the already wealthy. Stock exchanges, the financial and real estate sectors, and industrial and IT monopolies pay huge salaries to their managers and make huge profits, while taxes are cut and exploitation intensified, and education, healthcare, and public infrastructure are reduced. has been cut down to the bone.
A school dropout from a modest family, at the age of 17 he began renovating an attic in Innsbruck, which he sold as expensive apartments. “Buy it, lavishly renovate it, and raise the rent. This is the successful model that helped Innsbruck native René Benko grow from a 17-year-old school dropout to a real estate mogul,” the German weekly wrote. Die Zeit 1 year ago.
As soon as word of Benko’s initial success spread, he was flooded with money. “Benko’s empire thrives above all on wealthy backers,” he reported. Die Zeit In another article. Among the backers who helped him build his $1 billion real estate empire are Greek shipowner Georgios Ikonomou, former Porsche boss Wendelin Wiedeking, management consultant Roland Berger, and logistics billionaire Klaus Ikonomou. There were many people, including Michael Kuhne.
Benko deliberately showed pomp and splendor. He purchased famous buildings such as the Chrysler Building in New York, as well as luxury department stores such as Selfridges in London, KaDeWe in Berlin, Oberpollinger in Munich, and Alsterhaus in Hamburg. He built famous buildings such as Hamburg’s Elbtower, which now lies in ruins. He privately owns his jet and a luxury villa in Ischgl and invited guests to parties on his 40 million euro yacht “Roma”.
“Mr. Benko clearly knew that flaunting wealth attracts even more wealth.” Die Zeit Quote your business partner. He courted not only donors but also politicians. He was a mentor to then-Austrian Chancellor Sebastian Kurz, with whom he maintained close ties and helped find new donors during a joint trip to Abu Dhabi in 2018.
Benko’s unscrupulous tactics are evidenced by his involvement in German department store chains Kaufhof and Kallstadt, which previously narrowly avoided bankruptcy. Trade union Verdi hailed Benko as a “savior”, saying Benko had collected 680 million euros from the German government’s economic stabilization fund, merged the two chains into Galleria, closed dozens of stores and laid off employees. contributed to reducing wages.
For Benko, this was a great deal. He separated valuable real estate from the department store group and charged the latter huge rents for continued use. In this way, Cigna Holding’s real estate division made a profit of 800 million euros in 2020 during the coronavirus pandemic and paid out 200 million euros in dividends to shareholders, while Cigna’s loss-making department store chain received several payments from taxpayers. Collected billions of dollars in taxes. money.
Earlier this year, Verdi agreed to a restructuring plan for Galleria, which had filed for bankruptcy again the previous year. The plan cost an additional 4,000 jobs. Now, thanks to a series of concessions on Verdi’s part, the remaining 12,000 employees, whose monthly salaries are already 500 euros below the official collective bargaining rate, are at risk of eventually losing their jobs. They cannot rely on Verdy’s trade union, which bowed down before Benko and helped cut wages and jobs. The establishment of an independent action committee is necessary to protect jobs at risk.
Rising department store rents not only filled the coffers of Cigna’s real estate division, but also increased the paper value of the company’s properties, which is calculated based on rental income. Benko was then able to offer these properties as collateral and obtain even larger loans.
Ultimately, his Cygna empire consisted of an impenetrable web of over 1,000 individual companies, which also traded with each other. In addition to real estate, department stores and luxury hotels, daily newspapers (Funke Mediengruppe, Kronen Zeitung, Currier ).
When rising interest rates made it increasingly difficult to refinance high levels of debt, the entire house on the sand began to crumble. The European Central Bank (ECB) finally launched a special audit in August of this year on the banks that financed Cigna, telling them to hedge risks more effectively. In early November, rating agency Fitch finally classified Cigna as having a “high credit risk.”
It is not yet clear how the bankruptcy will affect Benko personally. According to reports, he has secured a personal fortune estimated at 5 billion euros, but plans to continue living a lavish lifestyle even if he loses some of this amount.