Banks circle ailing Kirch

Top exex ankling as rumors fly about company's future

BERLIN — Germany is bracing for a possible takeover of Leo Kirch’s debt-ridden media empire by creditor banks — and perhaps even the exit of Leo Kirch himself as the head of the company.

Rumors were rife Monday on both sides of the Atlantic that Kirch would soon relinquish the reins of the company over which he’s held sway for almost four decades.

Among Kirch’s client creditors are the seven Hollywood majors. They jointly stand to lose up to $2.2 billion over the next four years if the Teutonic titan defaults on the remaining installments of its megabuck output deals.

Just last week one of Kirch’s top lieutenants, programming chieftain Jan Mojto, jumped ship and set up his own production company. Another top exec, Dieter Hahn, is apparently also expected to resign.

Kirch’s creditor banks reportedly have agreed to assume control of KirchMedia in return for a $700 million capital injection.

This could force Kirch to turn the helm over to a bank-appointed corporate caretaker.

But the banks may prefer to hand control over to more experienced hands — such as those of Italian media mogul and Prime Minister Silvio Berlusconi or News Corp.’s Rupert Murdoch.

The two big-name junior partners may want to up their stakes in KirchMedia, the company’s core money-making terrestrial TV, sports rights and production division.

Berlusconi’s holding company Fininvest owns 2.5% of KirchMedia, while his Italian TV group Mediaset has an option for a further 2.3% stake. Murdoch holds a 2.5% share.

Berlusconi or Murdoch could even take over the division, which controls ProSiebenSat 1, Germany’s biggest commercial broadcasting group.

Minority shareholders, which also include German retailer Rewe and Saudi Prince Al-Waleed bin Talal, have asked the banks to reduce payments and cancel interest due on loans given to KirchMedia as part of a solution.

Regulators may step in

European antitrust regulators may, however, step in to stop Berlusconi from enlarging his holdings outside Italy, while German watchdogs say the nation’s top media regulating org, the KEK, would have to examine a Berlusconi bid carefully.

One Italian media expert said further acquisitions by Berlusconi were unlikely as he still faces protests over his media domination at home.

Berlusconi, who controls Italy’s three main commercial broadcasters and calls the shots at rival pubcaster RAI, has not lived up to his election campaign promise to resolve this conflict of interest — a point of growing contention among free-speech advocates and opposition leaders in Rome.

At this point in Kirch’s fortunes, even the once much-maligned Murdoch may be welcomed in Germany: With a $1.4 billion put option on his stake in Kirch’s ailing pay TV division, the global mogul still has the power to bankrupt the company, which would leave little to the banks.

An agreement between the financially strapped Kirch and its creditors is expected soon, possibly as early as Wednesday.

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