Kirch Finds Help in Cash Crisis, But Springer Loss Promises More Woe

13 December 2001

Wednesday was a day of mixed news for beleaguered German media giant Kirch Gruppe, with possible solutions to its cash crisis being offset by a warning of imminent losses from publisher Axel Springer Verlag, in which it has a 40% holding.

The firm has been plagued in recent days by reports that Rupert Murdoch had devised a Machiavellian scheme to take over Leo Kirch’s media empire by forcing the debt-laden group to buy back its stake in KirchPayTV in cash next year, an obligation it may not be able to meet [WAMN: 11-Dec-01].

Then came the decision by Dresdner Bank to demand repayment of a E500 million ($449m), leaving Kirch – with debts estimated conservatively at E7.7 billion – facing a cash crisis [WAMN: 12-Dec-01].

Twenty-four hours later and things seem a little less dire. Dresdner Bank performed a volte-face late Wednesday, agreeing to extend the loan, while Deutshe Bank provided a further boost by saying it would not recall its own loan of DM1.1bn.

In addition, Kirch has reportedly opened talks with Liberty Media, which may offer the German group help in meeting its loan obligations and cash demands. Liberty recently forged a TV alliance with Kirch [WAMN: 16-Nov-01], though some observers also noted Liberty boss John Malone’s sizeable holding in Murdoch’s NewsCorp.

Another source of cash may be Kirch’s 25% stake in Spanish broadcaster Telecinco, which has apparently caught the eye of French commercial TV firm TF1. The German media company is reportedly in talks to sell the holding to TF1 for around DM1bn (E511m, $459m).

However, the bad news came from Springer – Europe’s largest newspaper publisher – which warned it would post the first loss ever reported in its history this year.

Springer’s announcement prompted speculation that Kirch may seek to offload its holding in the newspaper group, despite recent assurances that it would do no such thing. Yet again, Murdoch is thought to be on the scene, hotly tipped by analysts to reveal an interest, though rival German publishers are also expected to join the fray if Kirch does decide to sell.

News sources: Financial Times; Handelsblatt (Germany)