The Kirch Group’s creditor banks have come up with a plan to save the group. But Kirch himself will have to give up his role in the company he founded nearly 50 years ago.
Rupert Murdoch and Silvio Berlusconi want to take over Leo Kirch’s media empire.
Leo Kirch has failed to stave off his creditors to stay in control at least of the core business of his media empire.
A few wrong moves is all it took. Debts built up during an acquisition spree and an expensive foray into pay television had the mogul with his back against the wall.
Last minute efforts to prevent the 5.7 billion dollar debt pile collapsing on top of him failed after talks with creditor banks led nowhere.
As a result, Kirch will loose control of the core television and rights trading business which he had hoped to hold onto. The sale of assets just didn’t yield the kind of money his creditors were looking for.
Instead the creditor banks came up with a plan under which the group would be kept afloat but Leo Kirch would have to relinquish control of Kirch Media, the group's core rights-business.
The banks are prepared to inject 500 to 800 million euros of fresh capital into Kirch Group. In return, the banks are asking for 60% of Leo Kirch's interest in Kirch Media, which holds a 52% stake in television company Pro Sieben SAT.1 Media AG.
Without a rescue package, Kirch may have to file for insolvency as early as next week. The pay TV arm is losing some 2 million dollars a day.
The plan still requires the approval of Kirch Media executives and major Kirch shareholders Rewe Group, Silvio Berlusconi, Rupert Murdoch and Lehman Brothers.
Murdoch and Berlusconi are seen as harbouring take-over ambitions regarding Kirch or parts of the group, which could yet throw a spanner in the works of the creditor bank’s plans.
And that would be particularly painful for Kirch, as they have been his greatest rivals in a battle for control of the German media market.
In a rare recent interview with Spiegel magazine, Kirch took a philosophical line in regard of a possible take-over by Murdoch.
"The lord giveth and the lord taketh away" he said.