News Corp., Mediaset may take over some Kirch assets

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Posted 8:45AM on Tuesday, March 26, 2002

FRANKFURT, Germany - Officials from the ailing Kirch media empire met Monday with creditors to consider a rescue plan sources said could turn over control of Kirch's five commercial television channels to media tycoons Rupert Murdoch and Silvio Berlusconi. The banking sources, who spoke on condition of anonymity, said the plan envisioned banks and investors injecting as much as 900 million euros ($790 million) in the form of more credit and share purchases to save heavily indebted Kirch from bankruptcy. In return, the rescuers would get a controlling stake in the company's main KirchMedia subsidiary, which holds a library of film and television rights as well as a majority stake in broadcaster ProSiebenSat.1, whose stations typically attract a 20 percent share of viewers in Europe's largest television market. Officials at Kirch, Italian Prime Minister Berlusconi's Mediaset and Murdoch's News Corp. all declined to comment. Munich-based Kirch has debt of at least 6.5 billion euros ($5.7 billion) run up buying rights to sports events such as Formula One auto racing and World Cup soccer and to fund separate pay-TV unit Premiere, which has run up billions in losses. Founder Leo Kirch, a Bavarian entrepreneur, admitted last month that he could lose control of his empire, and the talks in Munich are exploring which group - the banks or the investors - would hold a majority of the shares after a bailout. Bank officials said Monday that the latest proposal on the table had the banks stepping aside in favor of the investors. The talks were described as "difficult," and sources said the shape of any deal could change. Kirch and his family currently own 79 percent of KirchMedia. In addition to Berlusconi's Mediaset and Fininvest companies, which hold 2.48 and 2.28 percent, and Murdoch's News Corp., which holds 2.48 percent, KirchMedia's other shareholders include the investment firm Lehman Brothers, Saudi Arabian company Kingdom Holdings, U.S.-based Capital Research, and grocery chain owner Rewe. It wasn't immediately clear to what extent minority investors other than the companies of Berlusconi and Murdoch would take part in the bailout. Rewe said over the weekend it would not come up with more money. The banks involved are Bayerische Landesbank, DZ Bank, HVB and Commerzbank. Kirch and its creditors have been discussing for weeks a plan to fend off insolvency and turn around Premiere, which lost 898 million euros ($788 million) last year alone. Kirch has already said it is willing to sell assets such as a 58 percent stake in the company that owns broadcast rights to Formula One and a 40 percent stake in the publisher of Germany's top-selling daily newspaper, Bild, to raise cash.