Kirch Pay TV Division Goes Bankrupt
May. 08, 2002
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FRANKFURT, Germany (AP) _ The holding company for Kirch Group's pay television operation filed for bankruptcy Wednesday, joining the crumbling media giant's main television and film-rights division in declaring it can't pay its debts.
The filing by KirchPayTV, the parent of the money-losing subscription broadcaster Premiere, comes one month after a similar declaration by KirchMedia, the group's main business which holds its television stations and film-rights business.
Leo Kirch, the group's 75-year-old founder, has seen some 6.5 billion euros ($5.7 billion) in debt cost him control of his key businesses to bankruptcy administrators and creditor banks.
Analysts and creditors say parts of Kirch's empire _ especially KirchMedia's four national television stations held as part of its ProSiebenSat.1 subsidiary _ are valuable assets, and creditors have pressed for reorganizing the parts of the group that are still viable after ridding them of debt through court proceedings.
Premiere chief executive Georg Kofler said in a statement that the filing became inevitable when the current shareholders _ including Rupert Murdoch's BSkyB satellite broadcaster _ and creditors refused to provide more money to support the existing company structure.
He said Premiere would continue broadcasting and insisted bankruptcy offered a chance to rid the company of an undisclosed amount of debt.
``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.
The filing was ``the only chance to cast off the ballast of the past and put Premiere on solid footing,'' it added. 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 that it had appointed lawyer Joseph Fuechsl as bankruptcy administrator. He will administer and review KirchPayTV's finances and make a recommendation on whether the company can be restructured.
KirchPayTV's filing was widely expected. Premiere has bled cash at a rate of more than 2 million euros ($1.8 million) a day and was the source of much of the larger Kirch Group's financial troubles.
KirchPayTV lost some 989 million euros ($870 million) last year alone.
Many analysts say the German market has been difficult for pay TV. Germans already pay 16 euros ($14.65) a month in taxes to support public television, already receive 30 free channels and are reluctant to pay more.
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 Kirch. The remaining shares are held among Lehman Brothers Merchant Banking, Kingdom Holdings of Saudi Arabia, and U.S.-based investor Capital Research.
BSkyB said in a statement that it ``continues to monitor the situation carefully insofar as it relates to its investment in KirchPayTV and its put option.'' In February, BSkyB said it was wiping the stake off its books due to uncertainties over whether Kirch could buy it back.
Murdoch has questioned Premiere's use of cable technology, saying that it should ditch that in favor of higher-capacity satellite systems used by BSkyB.
Premiere in March announced a restructuring in an attempt to halt its losses, saying it would cut staff and try to lure more subscribers with an offer of 5 euros ($4.58) a month for basic service. The various levels of service top out at 40 euros ($36.62).