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Tuesday, 9 April, 2002, 16:22 GMT 17:22 UK
Kirch pay-TV escapes insolvency
Football being televised from sidelines
The broadcast of the football World Cup is safe
The pay-TV unit of embattled German media giant Kirch has narrowly escaped insolvency, as talks on whether and how the whole group can be rescued continue.

KirchPayTV includes the Premiere World pay-TV unit whose mammoth losses helped lead to Monday's insolvency of KirchMedia, the unit which holds both free-to-air TV channels and the group's vast stable of film and TV rights.

Market rumours suggested that KirchPayTV was a target of Rupert Murdoch's BSkyB.

BSkyB is already owed more than 1bn euros by Kirch as part of an option it struck to sell its 22% stake in KirchPayTV back to Kirch.

But BSkyB denied the rumour, saying exercising the option and getting its money back was its primary aim.

Help or not?

Meanwhile, the dogfight over who to blame for the collapse and how to pick up the pieces of Germany's biggest corporate collapse since World War II persists.

On Tuesday, German Chancellor Gerhard Schroeder offered to try to save jobs at the collapsed media empire Kirch.

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

Mr Schroeder said his government would be prepared to intervene to help save jobs at Kirch if requested by the insolvency administrator.

He said that, with 10,000 jobs at risk, an intervention was entirely justifiable.

Mr Schroeder also hinted that he was not against foreign participation in Kirch, according to a report in the Financial Times.

"I wouldn't have any objections if someone like Rupert Murdoch gets involved in pay-TV in Germany," he added.

A rescue proposal from investors including media tycoon Rupert Murdoch and Italian Prime Minister Silvio Berlusconi broke down last week.

Red faces

The collapse of Kirch is an embarrassment to the Chancellor, underlining the weakness of the German economy and high unemployment in election year.

But it also spells trouble for Edmund Stoiber, Bavarian premier, personal friend of the group's founder, Leo Kirch, and conservative challenger to Chancellor Gerhard Schroeder.

Most of Kirch's employment is in Bavaria, and the loss of the jobs could hit the reputation for turning the Bavarian economy around which is his main stock in trade.

Mr Stoiber is now backing away from signals that the group could be rescued by German banks and publishers, keeping aggressive foreign rivals outs.

He has already been criticised for the 1.9bn euros loaned on soft terms to Kirch by the Bayerische Landesbank, the group's biggest creditor. The bank is part-controlled by the Bavarian government.

World Cup salvaged

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.

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

And it is increasingly likely that Taurus, the holding company that groups Kirch's web of companies, could also be declared insolvent.

Economic gloom

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.

See also:

08 Apr 02 | Business
Kirch declares itself insolvent
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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