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Wednesday, 8 May, 2002, 10:13 GMT 11:13 UK
KirchPayTV goes bust
Football being televised from the sideline
German viewers have a choice of 30 channels
KirchPayTV has become the latest part of Germany's Kirch Group media empire to file for bankruptcy, submitting an insolvency petition to a court in Munich.

Its subsidiaries include Premiere World, which owns the broadcast rights to the World Cup finals kicking off later this month.

However, KirchPayTV said it has structured the bankruptcy filing in a way that allows Premiere to stay in business and keep broadcasting.

KirchPayTV is the second part of the Kirch Group media empire to be placed in administration, exactly one month after Kirch Media.

Costly mistakes

Kirch Media was the core film and TV rights unit of Kirch Group, founded by 75-year old media magnate Leo Kirch, and became Germany's biggest corporate failure since World War II after it could not meet its debts.

The media empire's debt problems have alarmed German politicians, who are reluctant to see key news outlets falling into foreign hands.

Premiere offices
Premiere owns the right to the World Cup

Kirch Group's debts are thought to be about 6.5bn euros ($5.9bn; 4.4bn), though as a privately held company it does not have to publish its accounts.

Much of them stem from the huge sums it paid to build up the pay TV platform and buy sports rights for Premiere.

But pay TV has struggled to find viewers in a country with more than 30 free-to-air channels.

Murdoch in the wings

The parent firm's insolvency was "the only chance to shake off the past and put Premiere on a solid footing," said Georg Kofler, Premiere chief executive.

Rupert Murdoch's satellite broadcaster BSkyB owns a 22% stake in KirchPayTV.

Mr Murdoch has reportedly held talks with the German firm's other creditors about the possibility of a deal which would put BSkyB in charge of Premiere.

BSkyB holds an option that gives it the right to force the German company to buy back the shares for 1.3bn euros in cash after 1 October - money the German broadcaster does not have.

Mr Murdoch has denied he wants to take over Premiere, insisting he wants the cash instead.

Other investors in KirchPayTV include investment bank Lehman Brothers and Saudi Prince Al-Waleed.

Hopes for change

Analysts said the bankruptcy filing could give KirchPayTV breathing space to restructure its debts.

"The big advantage for Kirch is that the insolvency gives it room to manoeuvre," said Markus Wallner, a media analyst at HSBC Trinkaus & Burkhardt in Dusseldorf.

The Kirch Group has a complex web of subsidiaries.

When KirchMedia filed for bankruptcy on 8 April most of the parent group's business remained intact.

Another Kirch division, KirchBeteiligung, owns rights to broadcast Formula One motor racing, and a 40% stake in publishing house Axel Springer.

The ultimate holding company for Kirch Group is called Taurus Holding.

That is where Mr Murdoch's BSkyB pointed to when asked for its reaction to the bankruptcy filing.

"If the current liquidity issues of Taurus Holding are not resolved, the group is unlikely to receive a significant amount, if any [for its 22% stake in Premiere]," BSkyB said.

The BBC's Elliott Gotkine reports on BSkyB
"Analysts are convinced European pay television isn't doomed"
The BBC's Dominic Di Natale
"Axel Springer is one of Europe's biggest publishers"
See also:

29 Apr 02 | Business
Kirch TV businesses struggle on
21 Apr 02 | Business
BSkyB 'to take over Kirch pay-TV'
09 Apr 02 | Business
Kirch pay-TV escapes insolvency
08 Apr 02 | Business
Kirch declares itself insolvent
08 Apr 02 | Business
Media giant falls back to earth
08 Apr 02 | Business
Q&A: Kirch's insolvency
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