Kirch Pay TV Division Goes Bankrupt
May. 08, 2002
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FRANKFURT, Germany (AP) _ Kirch Group's unprofitable pay television unit filed for bankruptcy Wednesday, completing the collapse of Germany's biggest commercial broadcaster after it piled up debt in an ill-fated expansion drive.
The Premiere subscription channel said the filing is ``the only chance to cast off the ballast of the past'' and find new investors. Rupert Murdoch's BSkyB _ a key shareholder and rumored predator _ said it was uninterested in putting up more money.
The bankruptcy of Munich-based KirchPayTV, which owns Premiere, comes a month after that of KirchMedia, which controls the group's free TV stations and film-rights library. Both Kirch's key operating divisions are now under the control of creditors and bankruptcy administrators.
A third division, Kirch Beteiligung, holds shares in Formula One racing and other companies. But those assets are already pledged as collateral or face possible selloff to pay back some of the group's debt of 6.5 billion euros ($5.9 billion).
With the company's founder, 75-year-old Leo Kirch, stripped of control, creditors and the administrators are trying to agree on how to restructure the companies and carry the healthy parts forward, in particular KirchMedia's ProSiebenSat.1, operator of four national television stations.
Premiere chief executive Georg Kofler said bankruptcy became inevitable when creditor banks and investors including BSkyB refused to provide more money to keep it afloat. Premiere has been losing 2 million euros ($1.8 million) a day and lost 989 million euros ($870 million) last year alone.
Bankruptcy was the only way to rid the company of its problems, reorganize to cut costs and make a fresh start, Kofler said in a statement. ``The conditions for this, however, are bringing costs in line with market realities and the possibility of moving to a company that is not burdened by the past,'' the statement said.
Kirch didn't provide figures for the pay-TV unit's debts. The company says it will cut its work force of 2,400 to 1,400 by the end of this year.
The Munich bankruptcy court said in a statement it had appointed lawyer Joseph Fuechsl as administrator, charging him with making a recommendation on whether the company can be restructured.
Analysts say KirchPayTV foundered in a tough market for pay TV. Germans pay 16 euros ($14.65) a month in taxes to support public television, already receive 30 free channels and are reluctant to pay again.
In addition, Murdoch's BSkyB has an option that would force Kirch to buy back BSkyB's 22 percent stake in KirchPayTV for around 1.7 billion euros ($1.5 billion) in October _ money that Kirch doesn't have. That further clouded the company's prospects.
KirchPayTV is 69.75 percent owned by Leo Kirch. The remaining shares are held among Lehman Brothers Merchant Banking, Kingdom Holdings of Saudi Arabia, and U.S.-based investor Capital Research.
There has been speculation that Murdoch and BSkyB might use Kirch's troubles to grab a chunk of the German pay or broadcast TV market, but so far this hasn't happened. BSkyB spokesman Robert Fraser said that ``we are not interested in further investment in KirchPayTV.''
In February, BSkyB wrote off the stake on its balance sheet due to uncertainties over whether Kirch could buy it back.