Keeping the Kirch Boat Afloat

The numbers are about as secure as the future of Leo Kirch’s German media empire.

After months of guess-timations that the KirchGruppe debts were roughly between 5 and 6 billion euro ($4.3 to $5.2 billion), the Wall Street Journal Europe reported Monday that the concern’s debts could be as high as 13 billion euro.

"That’s just what we could find so far, there could be more," the Wall Street Journal Europe reported an insider at one of Kirch’s big lending banks as saying.

It is just the latest in a seemingly never-ending string of bad news for the 75-year-old media mogul. He has ruled the German media landscape for more than a decade. He holds most of the country’s television and film rights from his headquarters in Munich and has a virtual monopoly on Germany’s commercial television channels.

Now his empire is on the verge of collapsing under heaps of debt owed to no fewer than six banks.

Chief among all lenders is the Bayern LB, the Bavarian state bank, with an estimated 2.2 billion euro owed it by KirchGruppe. Next in line, and most impatient recently, is Deutsche Bank, which has been mulling when to demand the between 600 and 700 million euro Kirch owes it.

Bank chairman Rolf Breuer recently said Kirch "isn’t credit-worthy" and has loomed heavily as the next lender to call in his chips.

Representatives of the six banks met over the weekend with no reported breakthroughs. For the time being, the banks have shown patience and Kirch a willingness to sell off as much as he can to stay afloat.

Sell, sell, sell

Hypovereinsbank and Dresdner Bank, to whom Kirch owes a combined 3.1 billion euro, plan to buy his 40 percent stake in the German publisher Axel Springer. The stake could earn Kirch 1.1 billion euro, but reports have him demanding more.

The money would go straight to Deutsche Bank. But US Investment banks JP Morgan Chase and Lehman Brothers also have rights to some of the money. The two banks apparently secured the stake as collateral in their dealings with Kirch, according to the newsmagazine Der Spiegel.

A plan to sell his 25 percent stake in the Spanish television station Telecino is in final negotiations, according to numerous reports. The plan would have Kirch sell about 16 percent now for 360 million euro and the remaining third later for about 216 million euro, according to reports.

Finally, Kirch is shopping around with his television rights to Formula 1 racing and his loss-making subscription channel Premier.

There has been muted interest by media group Bertelsmann in Formula 1, according to reports. Kirch is hoping Rupert Murdoch, who has a 1.6 billion stake in Premier, will take over the troubled channel before Murdoch calls in an option this coming October requiring Kirch to pay him back for his stake.

The prospect of Murdoch entering the German market has sent chills through the country’s politicians and media elite. Concerns that he could dominate the German media market and reduce the quality level of programming are among the reasons Chancellor Gerhard Schröder is expending political capital to keep Kirch afloat.

The chancellor met bank representatives like Breuer last week in order to collaborate on a Kirch salvage plan. But there are still no signs that the banks will cooperate.