(Bloomberg) -- A unit of Signa Prime Selection AG filed for insolvency in a Berlin court on Friday, Der Spiegel said, indicating efforts to save the sprawling property and retail conglomerate are faltering.

Signa Real Estate Management Germany GmbH couldn’t meet its payment obligations, the German magazine said, citing a request submitted by the company. The firm is a fully-owned subsidiary of Signa Prime, which co-owns the Selfridges department store in London and Berlin’s KaDeWe, and is itself the largest division in the group founded by Austrian tycoon Rene Benko. 

A full-blown insolvency of Signa Prime could come as a shock for European property markets as Signa Prime and Signa Development, another unit, valued their assets at more than €23 billion ($25 billion) at the end of 2022.

Signa Real Estate Management serves as “a central service provider within the SIGNA Group for the development and support of commercial properties in prime locations” in Germany, according to an annual report.

Earlier, Der Standard said Signa may hold a meeting with employees on Tuesday to inform them of the insolvency and further steps. 

A spokesman for Signa didn’t respond to a call seeking comment. The unit didn’t appear on a German registry of insolvency requests as of Friday evening.

Signa has been seeking cash from investors to plug a €500 million funding gap this year alone, and another €1.5 billion by the middle of 2024. The parent company, Signa Holding, appointed restructuring expert Arndt Geiwitz earlier this month to lead a turnaround and mend financing strains that had brought construction work at several projects to a standstill.

It wouldn’t be the first insolvency by a company within Benko’s empire.

Geiwitz was in charge of insolvency proceedings in the German department store chain Galeria, which ultimately cost taxpayers about €590 million due to the writedown of Covid-era loans.

Signa’s online sports retail unit, which was listed in the U.S. in 2021 via a $3.2 billion SPAC-deal, filed for insolvency last month after Benko’s Signa Holding withdrew a financing commitment.

A broader insolvency would leave a wide range of investors struggling to recoup their money. Signa’s shareholders — the first in line to take losses — include some of Europe’s richest families, including Austrian construction tycoon Hans Peter Haselsteiner and German transportation magnate Klaus-Michael Kuehne. 

Saudi Arabia’s Public Investment Fund has a junior debt position distributed throughout the Signa companies. Arini, the London hedge fund founded by former Credit Suisse credit trader Hamza Lemssouguer, is among the largest holders of a €300 million Signa Development bond, which are indicated at 27 cents on the euro, according to data compiled by Bloomberg.

Signa Prime and Signa Development had €1.76 billion in liabilities related to profit participation rights at the end of 2022. Bank creditors include a broad range of Austrian, German and Swiss lenders.

--With assistance from Libby Cherry, Steven Arons and Laura Malsch.

(Updates with Signa Development bond price in penultimate paragraph.)

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