BERLIN — In the wake of the disastrous start of his digital pay TV web DF1, German media mogul Leo Kirch is taking out a major loan from a group of Bavarian banks.
Although neither the banks involved nor the Munich-based Kirch Group were willing to reveal the amount of the loan, estimates in the German press run to over 1 billion marks ($592 million).
A major creditor involved in the transaction is the Bavarian state-owned Landesanstalt fur Aufbaufinanzierung (LfA). LfA prexy Rupert Pfeffer stressed on Monday that the bank was not providing public subsidies to the Kirch Group, but was granting a loan to Kirch “under the same conditions as other international business banks.”
The LfA is believed to be covering half of the sum borrowed, while a consortium of private banks will supply the rest.
A spokesman for the Kirch Group told Daily Variety that “this is a perfectly normal credit transaction between a group of banks and a private company.” The spokesman said the money borrowed would be “used to finance the business activities of the Kirch Group. It is not about DF1.”
But most observers in Germany believe that the failed start of DF1 is the main cause of Kirch’s financial problems. Rupert Murdoch’s BSkyB announced earlier this month that it would not take the 49% share in DF1 agreed upon at the launch of the digital channel in July.
Kirch has spent heavily in decoders, satellite dishes and other technical facilities for DF1. But the biggest strains on his purse are his immense outlays for pay TV output deals with the Hollywood majors and premium pay TV sports rights. With only 30,000 DF1 subscribers to date — far short of even the 200,000 hoped for by the end of 1996 — Kirch is clearly losing money at an alarming rate.