Banks prepare for Kirch collapse

Kirch has bought its way to dominance of the German media

German investors are bracing themselves for the collapse of the Kirch media empire, with the company now expected to file for bankruptcy on Monday.

The group - which owns the television rights to Formula One racing and football's World Cup - has been struggling to survive a cash crunch for several months.

If we fail on the emergency loan, there will be no other option but bankruptcy

Banking official

Kirch has been trying to persuade its investors - which include US bank Lehman Brothers, media mogul Rupert Murdoch, and Italian prime minister Silvio Berlusconi - to absorb some of its 9bn euro ($7.9bn; £5.5bn) debt mountain.

But sources said that Kirch creditors and investors were no longer talking after last-minute negotiations in Munich and Los Angeles ended without a breakthrough.

Hopes for an emergency bridging loan of 150m-200m euros have also been dashed, Agence France Presse reported.

"If we fail on the emergency loan, there will be no other option but bankruptcy," one banking source told the news agency.

Rumour mill in overdrive

Reports suggest that creditors and investors in the various parts of Kirch failed to agree on who would own which parts of the group, and who would supply additional finance.

The Kirch Group's finance director, Brian Cook, has left or will soon leave the company, according to unconfirmed reports.

Mr Cook was allegedly fired for taking a holiday in Florida in the midst of the firm's financial crisis.

Kirch itself is not making any comment on the speculation or on the progress of rescue plans.

Debt-laden

If Kirch Gruppe fails, it will not only trigger a scramble to snap up the World Cup and Formula 1 television rights, but could cause the collapse of several of Germany's top football clubs.

Germany's top league, the Bundesliga, is fuelled by money from Mr Kirch, and there has been talk of government loan guarantees to keep the clubs going.

Kirch amassed its immense loans in the 1990s, by buying up sporting and film rights to pipe exclusive content to its television channels.

Its most pressing obligation is to repay Dresdner Bank 460m euros, a payment which it has already twice delayed.

Taboo

But Norbert Schneider, head of Germany's powerful regional media regulators, has already warned that it would be unacceptable if Mr Berlusconi were to combine political power with television.

"We have no problems with Rupert and Silvio making high profits - we accept they want to make profit but we have trouble accepting their political goals," he said.

He explained that the freedom of the press and broadcasting in Germany was too important to allow a few rich people inordinate influence.

"Television is far too important for society and democracy to allow that," he said.

Meanwhile, the German government said it was considering setting up a 200m euro financial guarantee fund to stop German soccer clubs going bust if Kirch collapses.

"This is being discussed although without any concrete results as yet," an Economics Ministry spokeswoman said.