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Monday, 8 April, 2002, 17:37 GMT 18:37 UK
Kirch declares itself insolvent
Football being televised from sidelines
The broadcast of the football World Cup is safe
The main unit of the Kirch media empire has declared itself insolvent, in Germany's biggest corporate collapse since World War II.

The German media giant owns the broadcast rights to the football World Cup and Formula 1 motor racing, and its implosion puts thousands of jobs - and a string of television channels - at stake.

Investors and creditors failed to salvage the group as a going concern during negotiations that lasted all of the past week.

Let me make very clear that our goal is to prevent a carve-up of Kirch Media

Wolfgang van Betteray, new Kirch Media chief executive
The firm is now run by two new managers, and creditor banks are pondering whether to inject several hundred million euro to keep Kirch Media going.

Although Kirch Group, as a privately held company, does not publish accounts, it is thought to be at least 6.5bn euros (4bn; $5.7bn) in debt.

The heavy debts are the result of costly film rights deals and a misjudged foray into pay-television.

However, most of Kirch's lucrative sports rights and other assets, including the World Cup, Formula One racing and its stake in the popular tabloid Bild, are held by other subsidiaries, keeping them well away from the claws of creditors and administrators.

Rescue hopes

Leo Kirch
Leo Kirch is a hugely influential figure

Kirch Media and its dozens of subsidiaries are vital pieces in the complex structure of the Kirch empire.

There are now rumours that Taurus, the holding company that groups Kirch's web of companies, could itself be declared insolvent.

Another potential casualty is Premiere, Germany's only pay-tv channel.

And Leo Kirch, the 75-year old founder of Kirch Gruppe, is now set to step down himself, the firm's administrators said.

But Edmund Stoiber, the Bavarian premier and conservative challenger to Chancellor Gerhard Schroeder, has signalled that the group could be rescued by German banks and publishers, keeping aggressive foreign rivals outs.

"Insolvency does not mean the destruction or the end of the company, rather an opportunity and it also means new owners," he said .

Key KirchMedia assets
KirchSport: TV rights to World Cup and other sports
ProSiebenSat 1: Sat 1, ProSieben, Kabel 1, N24 cable channels
DSF sports channel
Taurus Produktion: Film and TV production units
Taurus Lizenz and others: Fiction and media rights

Mr Stoiber has a strong political interest in salvaging Kirch since the insolvency will have deep implications for the Bavarian economy, whose relative health has been one of the main planks of Mr Stoiber's appeal.

Leo Kirch, the group's founder, is a personal friend of the Bavarian leader, and the Bavarian government is thought to have been the driving force behind a 2bn euro loan from Bayerische Landesbank.

German press reports say that Kirch's main banks, its financial advisers and the Bavarian government will throw the group a lifeline.

But stitching together a deal will prove problematic: a rescue proposal from investors including media tycoon Rupert Murdoch and Italian Prime Minister Silvio Berlusconi broke down last week.

Bits and pieces

KirchMedia satellite dishes
KirchMedia is a broadcaster, not just a sports firm
Kirch Media's new chief executives hope to keep the firm going.

" Let me make very clear that our goal is to prevent a carve-up of Kirch Media", said Wolfgang van Betteray, now one of the two men in charge of the failed company.

Alternatively, industry rivals will be keen to acquire some of Kirch's assets, many of which have high intrinsic value.

Some of Kirch's key properties have been shielded from insolvency.

Kirch's Formula One rights are held by its majority-owned SLEC subsidiary, not included in the insolvent KirchMedia unit, and are now likely to be sold.

And the firm has already ring-fenced its rights to World Cup coverage in 2002 and 2006, after transferring them to a KirchSport unit in Switzerland.

Fifa's president Sepp Blatter and Kirch's chief executive stripped the World Cup rights - valued at 1.9bn euros - out of the group last month.

It would have been difficult to renegotiate the broadcast rights, with less than two months to go until kick-off.

Boom and bust

Leo Kirch spent almost half a century building up the group which controls Germany's biggest commercial broadcaster ProSieben and 40% of the popular tabloid Bild (also not included in the insolvency announcement).

Kirch's film archive
Some of Kirch's assets have genuine value
The group has a workforce of about 9,500.

The insolvency of KirchMedia is yet another blow for German business, which has suffered the failure of a string of well-known corporate names in recent months, including construction firm Holzmann and stationer Herlitz.

There were 32,000 insolvencies in Germany in 2001, 14% more than the year before.

Experts believe the number could rise to 40,000 this year.

The BBC's Russell Hayes
"It is a humiliating end for Leo Kirch"
The BBC's Harry Peart
"Kirch's collapse casts a cloud over the sporting world"
The BBC's Jeff Randall
"Business is about winners and losers"
See also:

08 Apr 02 | Business
Kirch sidestep saves World Cup
08 Apr 02 | Business
Q&A: Kirch's insolvency
08 Apr 02 | Business
Kirch 'to escape break-up'
05 Apr 02 | Business
Banks prepare for Kirch collapse
05 Apr 02 | Business
Fears of German football crisis ease
05 Apr 02 | Business
Media giant falls back to earth
28 Mar 02 | Business
Kirch holds breath as talks break up
27 Mar 02 | Business
Berlusconi firm 'abandons' Kirch
26 Mar 02 | Business
Kirch empire nears break-up
20 Mar 02 | Europe
German media giant sheds jobs
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