Worthless shares as collateral: this is what Benko’s 606 million franc loan includes

class = “sc-cffd1e67-0 fmXrkB”>

Julius Baer announced on Monday that it had given a 606 million franc loan to a “European conglomerate”. As SonntagsBlick previously reported, the total commitment includes three loans of 200 million francs each. Further research has now revealed how the three slices are formed. These essentially consist of a mix of Signa Group shares and mortgages on Signa properties in Germany.

The shakiest tranche: Bank Bär gave a 200 million franc loan to Signa Holding, owned by René Benko (46). The bank took the shares of its subsidiary Signa Prime as collateral. This loan is particularly at risk as Signa Holding went bankrupt and filed for bankruptcy in Vienna on Wednesday. Therefore, the value of the shares is likely to go to zero. The bank may hope for bankruptcy dividends at the end of the bankruptcy proceedings. But this could take years. The amount of compensation is likely to be low, probably well below 20 percent.

The second tranche of 200 million is the financing of commercial properties belonging to the Signa Group in Germany. It is unknown what features are included. It is also unknown how heavy the goods carry. Part of René Benko’s business model was to purchase real estate and increase their value through sharply rising rents.

Rents have doubled

This system worked especially well for properties rented by companies controlled by René Benko himself. An example of this is luxury store KaDeWe in Berlin. It is said that the operating company’s rents doubled after he joined. This system worked well as long as interest rates were low and commercial real estate prices were rising. But the wind has already changed. It is doubtful whether Julius Baer will be able to escape its mortgages without loss.

The third tranche was secured by shares in the so-called luxury group. These include luxury department stores such as KaDeWe, the Swiss group Globus and the British group Selfridges. With Thai Central Group also involved, Signa Premium shares are considered relatively safe. This week it announced its commitment to department stores in Europe. However, he is in no hurry to buy shares of Signa Group at the moment. The longer you wait, the more attractive the price becomes for the Thai group.

According to insiders, Julius Baer could lose up to 300 million francs in total due to Benko’s loans totaling 606 million francs. Bank analyst Andreas Venditti from Vontobel also assumes that a loss of 300 million will be written off. The bank has so far reserved only 70 million francs for defaults. There is a high probability that the Zurich private bank will soon have to make additional provisions. A bank spokesman declined to comment Saturday.

The stock market reacted very strongly

Benko’s commitment turns into a fiasco for the private bank. Julius Baer has branched out into business areas that aren’t in the DNA of a private bank, and now it’s getting paid for it. For Benko, the bank developed specialized structured loans more commonly seen in institutions specializing in corporate clients. The stock market reacted extremely harshly to the fiasco: Bank Julius Baer’s shares have lost more than 20 percent of their value in the last two weeks. As of Friday, the bank’s value stood at 9.18 billion. Before the crisis, this number was over 11 billion. About two billion francs flew into the air.

The bank management is responsible for this fiasco: Chairman Romeo Lacher (63) and CEO Philipp Rickenbacher (51). As many sources confirm, the loans given to Benko were approved at the highest level. The loan passed the board’s risk committee, which includes Lacher. Also in the photo were CEO Rickenbacher, chief risk officer and chief financial officer. They were ready to take a risk with René Benko and make him their most important client.

The best bosses are on duty

If anyone should take responsibility for failure, it’s the higher-up bosses. In this case, since the loans are approved at the highest level, it is not enough to fire a lower-level employee. Romeo Lacher and Philipp Rickenbacher are responsible. Which of the two takes responsibility?

It looks like the bank still wants to wait for the crisis to end. Interview requests from SonntagsBlick were politely declined. Is this a good strategy to regain damaged customers’ trust? This can be doubted. But keep your eyes closed and see the typical characteristics of a company without a powerful shareholder in the background. The Bär family has long since retired. The largest shareholders are institutional investors. They like to put their hands on their laps even when they face the biggest problems.

For decades the Bär family was in charge. Although Julius Baer was the first private bank to go public in Switzerland in 1980, the family retained control of the group through voting shares. This situation changed in 2005 with the introduction of the “one share – one vote” principle. The Bär family’s share fell below the reporting threshold of three percent.

Since then, the bank no longer has a major shareholder who can take responsibility in the event of a crisis. Joint-stock asset management companies took over. Today, the largest shareholder is US fund manager MFS Investment Management, followed by UBS Fund Management, Blackrock and T. Rowe Price. All four shareholders had to accept book losses of over 350 million francs in the last few days. No turmoil can be expected.

*Business journalist Beat Schmid has worked for many major media companies throughout his career. He writes about financial matters at SonntagsBlick.

Source :Blick