(Bloomberg) -- Austria’s top court ruled that a restructuring plan put forward by Signa Prime Selection AG and its creditors was unlawful, pushing the luxury landlord into bankruptcy.
The Supreme Court verdict follows a months-long court battle over the restructuring agreement adopted in March by creditors of the flagship unit in tycoon Rene Benko’s erstwhile conglomerate.
The plan aimed to pay creditors 30% of their claims by appointing a trustee to manage a protracted sale of assets, benefiting from an anticipated recovery in market valuations.
But Austria’s Finanzprokuratur, an agency that acts as the government’s legal representative in civil proceedings, challenged the proposal, saying it wasn’t viable and failed to meet criteria for a restructuring.
“A restructuring has not succeeded,” the Supreme Court said in a statement confirming the initial verdict. “Assets will now be realized in a bankruptcy process.”
Finanzprokuratur President Wolfgang Peschorn had long opposed the restructuring, saying it risked harming Austria’s reputation as a business destination, and would shield the public from understanding the reasons for Signa’s meltdown.
ABEL Rechtsanwaelte, the law firm acting as Signa Prime’s insolvency administrator, said after the ruling that it would continue in its role until further notice.
It has already agreed to sell a handful of assets, including the Selfridges department store in London and Berlin’s KaDeWe. Transactions have been made more difficult by complex ownership and debt structures, and court battles.
Once among the largest commercial real estate companies in Europe, Signa Prime filed for insolvency last year due to rising interest rates, a regulatory probe of its banks and falling markets valuations.
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