Kirch Collapse: Insolvency in the Stars for Taurus

22 April 2002

The latest crisis to hit Leo Kirch’s German media empire is expected as early as today (Monday), in the form of an insolvency application by Kirch Gruppe’s holding company Taurus.

The collapse follows the insolvency filing a fortnight ago of flagship rights unit KirchMedia, which bore the brunt of Kirch’s €6.5 billion ($5.8bn; £4bn) debt mountain [WAMN: 09-Apr-02]. As KirchMedia was used to channel cash into the other units – KirchPayTV and investment vehicle Kirch Beteiligung – its collapse has not been contained.

Taurus’s imminent insolvency is expected to hasten the break-up of the Kirch empire, though bankers argue that it will help the restructuring proceed in a more orderly fashion, preventing raids on the company’s assets by creditors.

Such incursions are contemplated by Bayerische Landesbank, J P Morgan Chase and Lehman Brothers, all eyeing Kirch’s 58% holding in SLEC, the company that owns the rights to Formula One motor racing. Their plan is to sell the F1 asset to the auto firms who compete in the championship.

Meanwhile, as revealed last week [WAMN: 18-Apr-02], fellow German media giant Bertelsmann is considering buying a stake in KirchPayTV, in which it held 50% until 1999. However, the potential white knight is said to be waiting until the unit files for insolvency, in order to negotiate a better price.

Data sourced from: Financial Times; additional content by WARC staff