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Friday, 15 February, 2002, 13:15 GMT
Kirch seeks bailout
Michael Schumacher drives Formula 1 Ferrari
Kirch bought the rights to Formula 1 last year
Troubled German media giant Kirch is reportedly considering selling its stake in Formula One motor racing to reduce its debts, analysts said.

Kirch, which is Germany's biggest commercial TV broadcaster and owns the rights to the World Cup, is burdened by debts totalling at least $5bn (3.5bn), many of which fall due this year.

It has spent much of the last week in talks with creditors that have reportedly centred on bail out options.

Kirch said on Thursday that the talks were "constructive" and would be continued.

Hostile creditors

Kirch has denied media reports it was considering selling its 58% stake in Formula One.

Michael Schumacher drives Formula 1 Ferrari
73 year-old founder Leo Kirch has a tough reputation

German newspaper Handelsblatt reported that racing tycoon Bernie Ecclestone was ready to buy back the stake for 800m euros ($696m; 488m), half of what Kirch paid for it last year.

But even as talks continued between Kirch and its bankers, new problems emerged involving other creditors.

Institutional investors in free-to-air TV station ProSiebenSAT want repayment of 400m euros of bond debt, the Financial Times reported.

They have appointed a London law firm to pursue the debt and are threatening to block the strategic merger - part of the debt-laden group's wider restructuring - of rights business KirchMedia and ProSiebenSAT, pencilled in for June.

'Very awkward'

What makes Kirch particularly vulnerable is loan terms that mean a default at one of its units could be deemed a default by the whole group, analysts said.

Michael Schumacher drives Formula 1 Ferrari
Bernie Ecclestone, F1 chief

"This puts Kirch is a very awkward situation and is one further complication to the merger," David Staples of Fitch told the Independent newspaper.

Meanwhile, Kirch has denied a report by Reuters news agency that DZ Bank is demanding repayment of debts worth 400m euros ($348.4 m).

Bailout on the way?

A partial solution to Kirch's problems would be offered by the purchase by some of its creditor banks of its 40% stake in media firm Axel Springer for about $1bn.

This proposal is thought to have been central to talks the firm held with Hypovereinsbank (HVB), Dresdner and others over recent days.

Analysts view it as offering a breathing space but unlikely to provide enough funds to meet all potential demands on the firm.

Murdoch in the wings?

Meanwhile, News Corp has ruled out accepting shares in exchange for its 22% stake in Kirch's pay TV operations. It holds an option to sell it back to Kirch, which can be triggered from October.

"We are not interested in a debt-to-equity swap, most definitely not in the pay-television company at the moment," said News Corp boss Rupert Murdoch at a press conference after the Australia-based group's financial results.

Mr Murdoch trimmed his interests in Europe this week by selling his loss-making Italian pay-TV business Stream to French firm Vivendi Universal.

But some analysts believe Mr Murdoch may be eyeing the assets of Italian state broadcaster, RAI, which could privatise three channels under plans being drawn up by the government of Prime Minister Silvio Berlusconi.

 WATCH/LISTEN
 ON THIS STORY
Thomas Knipp, editor of Handelsblatt
"Mr Kirch bought too many assets"
See also:

07 Dec 01 | Business
Murdoch 'mulls Kirch takeover'
07 Sep 01 | Business
Kirch creates German media giant
29 Oct 01 | Business
DirecTV sold to Echostar
06 Apr 01 | Business
New force in F1
06 Apr 01 | Business
Ecclestone: F1 to remain on free TV
01 Mar 01 | Business
Formula One battle hots up
27 Feb 01 | Business
Car makers may bid for F1
16 Feb 01 | Business
EM.TV rescue deal wobbles
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