Particularly brazen

Benko’s balance sheet cosmetics: the million-dollar trick with kika

René Benko's Signa Group took over kika/Leiner in the summer of 2018.(Bild: APA/Fohringer; babiradpicture/Knoth, Krone KREATIV)

The kika brand was valued by Signa at over 30 million euros. At the insolvency auction, it fetched just 142,000 euros. A lesson in the Benko system: bogus profits, fantasy valuations and a billion-euro collapse.

When René Benko was still celebrated by certain media as an "entrepreneurial genius", everything looked brilliant. His Signa balance sheets showed profits year after year, although core companies such as Signa Prime had been operating in the red for years. How did that work? Quite simply: assets such as buildings and brands were revalued every year and made more expensive.

This resulted in fictitious profits, although in reality much more money was spent than was earned. A house of cards that could only be held together thanks to creative number crunchers and clever balance sheet cosmeticians.

René Benko's Signa Group took over kika/Leiner in summer 2018.(Bild: APA/Fohringer; babiradpicture/Knoth, Krone KREATIV)

"Project Amber": reaching into the make-up case
A particularly dazzling example: kika/Leiner. In 2022, the furniture balance sheets were in the cellar. So Benko's manager puppets reached deep into the make-up case for balance sheet cosmetics, as confidential documents available to the "Krone" show. Under the code name "Project Amber", Signa merged the two companies kika and Leiner with retroactive effect from September 30, 2021. Officially to show a "stronger balance sheet". In reality, however, it was mainly to artificially boost assets. With the help of a German law firm, allegedly valid brand values were suddenly discovered that had previously hardly played a role:

• kika: 32 million euros

• Vivre: 10.6 million

• The Lodge: 900,000 euros

• Vonderstedt: 3 million

That makes a total of almost 46 million euros in new "brand value". And the balance sheet looked pretty again.

Excerpt from the "Secret Project Amber": Brands were revalued by millions.(Bild: zVg)

A cycle of hot air
The reason for the sudden increase in value sounds almost absurd: the brands were worth more because the store locations had long-term leases with up to 22 years remaining. And who owned the properties? The Benko empire, of course, through its Signa real estate arm. So one Benko company supported the value of the other. A cycle of hot air used to inflate fictitious values.

But the beautiful illusory world did not last long. When kika/Leiner slipped into insolvency in June 2023, just a few days after the unexpected sale by the Signa Group, the artificially created balance sheet bubble burst. In the 2022 annual financial statements, all inflated brand values were written down to zero. What was previously said to have been worth 46 million euros evaporated completely.

Thousands of employees lost their jobs 
There is little left of kika/Leiner. More than 3000 employees lost their jobs in the last insolvencies. In October, the kika brand was auctioned off on the Aurena auction platform in renewed insolvency proceedings. For 142,000 euros. A loss in value of over 99 percent.

The kika example shows how the entire Benko empire functioned for years: real estate in particular, but obviously also brands, were regularly revalued in order to generate apparent profits. This made it possible - despite the lack of real profits from the surplus of income minus expenses - to constantly convince new investors.

In reality, however, Benko obviously only created a huge Potemkin village with his Signa. Following the collapse of the Signa Group, it is now clear that a total loss of around 40 billion euros remained after the house of cards collapsed.