Kirch creditors close in on Formula One

BayernLB, J.P. Morgan, Lehman Brothers in line for 75%

BERLIN — Creditors of bankrupt media giant Kirch Group look set to pounce on one of its most precious properties, Formula One motor racing, while Italo premier Silvio Berlusconi’s TV group Mediaset is mulling a bid for Kirch’s Sat1 and Pro7 channels.

German bank BayernLB and U.S. investment banks JP Morgan and Lehman Brothers want a 75% stake in Formula One in return for $1.6 billion in loans. The move has been expected since Kirch’s empire began crumbling in April. Since then, all of the group’s main divisions have filed for insolvency.

BayernLB lent Kirch $1 billion to acquire Formula One stakes from cash-strapped kidvidder EM.TV and Formula One founder Bernie Ecclestone last year. JP Morgan and Lehman each lent Kirch an extra $300 million. The banks now want Kirch’s 58.3% stake in Formula One marketing outfit SLEC as well as the 16.7% stake still owned by EM.TV, which used it as collateral after Kirch bailed it out last year.

The seizure of its Formula One stake could mean a $200 million loss for EM.TV, which has been making slow strides toward improving its finances since its near collapse.

BayernLB has said it would resell the Formula One stake. International carmakers — who have been threatening to start up a rival racing circuit when their contracts expire in 2008 — are expected to end up with a piece of the business.

Meanwhile, Mediaset is chasing Sat1 and Pro7, Mediaset prexy Fedele Confalonieri confirmed Monday, despite fears in Germany about Berlusconi’s interference.

As the Kirch Group is “bound to be auctioned,” Confalonieri said, Mediaset will decide what to do when the price is announced.

“Certainly two of the four TV webs of the group, Sat1 and Pro7, which jointly make up 45% of the German TV advertising market, are very interesting. It would be very tempting to be in Germany, which is a big country, but we will have to see both the conditions and the prices,” Confalonieri said. “There are many obstacles on our road because television is a highly sensitive issue from the political point of view.”

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