Banks may take control of KirchMedia

Creditors are said to be aiming for deal by March 31

BERLIN — It looks increasingly likely that a slew of German banks may end up with control of the Kirch Group’s core free TV, production and licensing division in return for reopening vital credit lines to the debt-ridden company.

Discussions between Kirch and its creditors, the Bayerische Landesbank, HypoVereinsbank, DZ Bank and Commerzbank, could result in the banks taking a 50% to 60% acquisition in the money-making KirchMedia unit, according to sources.

Kirch is battling for its financial life as it squirms under a $6 billion debt, looming credit payments and costly shareholder put options. Company is putting all non-core assets on the block in a last ditch effort to raise funds, but many of its holdings are tied up in complex loan deals serving as security collateral.

The banks are zeroing in on KirchMedia, which controls popular German webs ProSieben and Sat.1 as well as lucrative sports rights and a vast film catalogue. With reported interest payments in the millions due next month, creditors are said to be aiming for a deal by March 31.

In return for a majority stake in KirchMedia, the banks reportedly are prepared to inject $450 million to $775 million into the hemorrhaging group and keep further credit lines open. This could force company topper Leo Kirch to turn the helm over to a bank-appointed corporate caretaker.

Meanwhile, the bankruptcy of German construction group Philipp Holzmann may bode ill for Kirch, according to analysts. The debt-ridden company, which was saved from insolvency last year by government intervention, collapsed last week after its creditors failed to agree on a rescue strategy. Holzmann’s creditors include HypoVereinsbank, Commerzbank, Dresdner Bank and Deutsche Bank. The banks rejected a rescue plan suggested by Deutsche Bank, itself a minority shareholder in Holzmann.

Tensions surrounding Holzmann could affect the negotiations with Kirch, putting Deutsche Bank, also a Kirch creditor, in a non-compromising mood, according to analysts.

Blood between Kirch and Deutsche Bank turned bad last month after Deutsche Bank CEO Rolf-Ernst Breuer said Kirch was no longer credit worthy, which prompted the media giant to threaten legal action against the bank and its chief exec.

Deutsche Bank is not taking part in talks with the media group but does have a $500 million loan to Kirch covered by the company’s 40% stake in newspaper publisher Axel Springer, which is for sale.

(Christian Kohl in Cologne contributed to this report.)

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