Austrian Regulators are Scrutinizing a Small Bank's Ties to Adler

Austrian regulators are increasing their oversight of a bank owned by several investors with ties to the Adler Group, a German landlord that is facing allegations of fraud from short-sellers.

Officials from the Austrian central bank conducted an on-site audit of Vienna-based Euram Bank AG earlier this year, according to people familiar with the matter. The lender has eight shareholders with stakes just below 10%, which is the threshold at which the financial watchdog FMA starts vetting bank investors.

Many of Euram's owners have worked closely with Adler or its backers, and at least two are run by former board members of the German landlord or its subsidiaries. This close relationship gives Euram an inside view of the company's operations and helps it provide the best possible service to its clients.

A spokesman for the Austrian central bank said that the bank has been closely monitoring Euram's transactions with its own shareholders and officers for some time. He declined to provide details of ongoing supervisory measures.

Banking supervision in Austria is shared between the central bank and the financial watchdog FMA. The FMA declined to comment on the matter.

Adler was accused last year by short seller Viceroy Research of being run for the benefit of a small circle of investors led by Austrian tycoon Cevdet Caner. Adler and Caner have denied the allegations, and a KPMG review didn’t find evidence of systemic fraud, though it didn’t disprove some of the allegations. In response to the allegations and the collapse of its shares and bonds, Adler has been selling assets and cutting debt. KPMG has resigned as Adler's auditor.

The Austrian regulators are reviewing potential conflicts of interest in Euram's transactions and the quality of collateral in those deals, according to sources familiar with the matter.

Euram's accounts reveal that it has debt issued by Adler's former top shareholder, an investment firm called Aggregate Holdings SA, which is owned by financier Guenther Walcher and run by Caner. Euram also advised investment funds that purchased securities issued by Aggregate, Adler, and related companies.

Euram was founded in 1999 and provides wealth management services to clients from Europe, Russia, the Middle East and Central Asia. The company offers real estate financing and asset management, and publishes its annual report in German, English and Russian.

A spokesperson for Euram said the bank is not aware of any investigation by the FMA into its ownership structure. The spokesperson said the central bank had carried out a standard credit check.

Euram Bank has issued a statement in response to a recent report, saying that there is no evidence to suggest that shareholders have been using the bank for potentially problematic deals. The bank emphasized that all of its lending transactions are compliant and that it acts transparently towards the supervisory authorities.

Euram Chairman Peter Maser was also Adler Group’s chairman until the company replaced him earlier this year. This was in response to Viceroy’s report. Maser is now vice chairman of a Liechtenstein-based firm called Bank Alpinum AG, which Walcher recently acquired.

Maser said that it is completely normal to hold several supervisory board mandates. He added that neither he nor anyone close to him has ever done business with Euram Bank.

Maser is one of nine major shareholders in the holding company that owns Euram Bank, according to a report on its annual general meeting dated June 1. Only one shareholder, co-founder and Chief Executive Officer Manfred Huber, owns slightly more than 10% of the company.

Another shareholder in Euram is an Isle of Man-based company whose director is Thomas Katzuba von Urbisch. Von Urbisch is a Monaco-based lawyer who was on the board of Adler Real Estate AG until 2018. He was also a director at Mezzanine IX, the investment vehicle through which Caner’s family held a stake in the landlord.

Nematollah Farrokhnia is a former executive at Austrian builder Strabag SE. The family office founded by his son was part of an investor group that agreed this month to pay €488 million for a Berlin property Aggregate is selling to reduce debt. The family office, named Imfarr, at one point also invested in Adler through a company it jointly owned with Caner’s Mezzanine IX, according to a report by the Austrian takeover commission.

The von Urbisch family declined to comment on the aggregate purchase.

Euram's balance sheet listed €720 million in assets at the end of last year, with most of it being cash. The firm's annual report doesn't detail the majority of its €162 million in loans and advances to customers, but does list €5.8 million worth of securities in that category. Among them were €1.4 million in Aggregate debt due in 2025 and €1.8 million of notes to Aggregate's VIC Properties. The Aggregate security has lost over 60% of its value in the past 16 months.

The Aggregate note is also held by the Europportunity Bond fund, which is managed by Euram and hosted by French asset manager Amundi SA. According to a filing, the bond accounted for 3.8% of assets at the €36.2 million fund at the end of April.

The fund's objective is to invest in bonds of EU accession countries or those aspiring to accession, and Eastern European bonds, according to a document on the firm's website. Aggregate is based in Luxembourg and has properties in Germany and Portugal.

The Advantage Stock fund, run by Euram in partnership with Amundi, also held stakes in Adler Group, its Consus Real Estate unit, and Accentro Real Estate AG.

Euram said that the stakes amounted to 2% of the stock fund and 4% of the bond fund, and that they were therefore completely insignificant.