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BERLIN — The collapse of Leo Kirch’s empire became official Monday, with the media giant’s filing for bankruptcy. The firm’s topper, a pivotal player in the global media industry for nearly half a century, offered to step down.

After weeks of negotiations, creditor banks and minority shareholders failed to reach agreement on a rescue plan for Kirch Media, the Kirch Group’s core division that controls a vast film library, sports rights and commercial broadcaster ProSiebenSat 1.

The company’s insolvency will go down as the biggest in the Germany’s post-WWII history. However, creditor banks are nonetheless prepared to inject “massive” capital to keep Kirch Media afloat.

Kirch Media has outstanding debt of €1.4 billion ($1.23 billion) to creditor banks and owes a further $440 million to Hollywood studios stemming from output deals, said Wolfgang van Betteray, a Kirch-appointed corporate troubleshooter who has become interim chief exec of the company’s new management. Van Betteray will continue the inhouse restructuring begun earlier this year.

A thorough restructuring of Kirch Media could take up to six months due to the unit’s complex structure.

The entire Kirch Group was crushed by a $6 billion debt burden and hemorrhaging costs. It remains unclear how many of Kirch’s 10,000 employees will now lose their jobs; some have put the number as high as 3,000-4,000.

At a news conference Monday, Van Betteray said he was in contact with the Hollywood studios, adding that he was optimistic existing contracts could be renegotiated and brought down to current market prices.

Van Betteray said Kirch Media would seek to continue purchasing films from Hollywood partners under better conditions. With bankruptcy, company could choose to drop existing contracts or renegotiate them, he pointed out.

Further bankruptcies are expected soon of the group’s money-losing KirchPayTV and TaurusHolding, the umbrella company that contains the three main divisions (Kirch Media, KirchPayTV and KirchBeteiligung).

Insolvency filing stopped

An insolvency filing by KirchPayTV was halted at the last minute Monday afternoon after an unnamed shareholder intervened. A bankruptcy of TaurusHolding or KirchPayTV would be a severe body blow to News Corp. topper Rupert Murdoch since it would nullify a hefty $1.4 billion put option the global mogul has on his 22% stake in the pay TV division.

With losses of around $2 million a day, given its inability to attract enough subscribers to cover pricey film and sports rights, the pay TV arm has largely contributed to Kirch’s collapse.

As part of its restructuring efforts, the new management has severed ties between Kirch Media and KirchPayTV and said any new deals with Hollywood would be for free TV rights only, with KirchPayTV now forced to fend for itself.

In addition to providing short-term capital, creditor banks — also including BayernLB, DZ Bank and HypoVereinsbank — are seeking participation from German publishing groups Axel Springer and WAZ. Axel Springer may swap its $675 million claim against Kirch for a stake in the new outfit.

The group’s control of Formula One motor racing and its 40% stake in Axel Springer are held by the KirchBeteiligung division, which has not filed for insolvency.

Rescue attempt dropped

A rescue attempt of Kirch Media by creditors and minority shareholders, including Murdoch and Italian Prime Minister/media baron Silvio Berlusconi, was abandoned after weeks of wrangling failed to produce a mutually acceptable agreement.

While creditors and Bavarian state politicians were said to be striving for a “national solution” to keep Kirch Media together, Wolfgang Hartmann, chairman of Commerzbank, said banks would be open to foreign investors who wanted to support the company — but only “if they are prepared to work together and not against each other.”

Speaking at the news conference, Hartmann blasted Berlusconi’s Mediaset and News Corp. for blocking each other and keeping a rescue plan from being formulated. He described Mediaset’s behavior as totally unprofessional.

Kirch Media confirmed it had transferred its rights to the 2002 and 2006 World Cup soccer championships to Switzerland-based KirchSport, saving the rights from possible loss through insolvency. With the event starting this summer, the move was greenlit by banks and international soccer association FIFA to avoid the complications of reselling the rights and, contrary to some reports, does not provide Leo Kirch or his deputy CEO Dieter Hahn with profits from the World Cup deals.

Subsidiaries most at risk include Kirch Media’s money-losing sports broadcaster DSF and broadcast service provider Plazamedia as well as KirchBeteiligung’s regional weblets TV Munchen, TV Berlin and TV Hamburg.

ProSiebenSat 1, which is 53% owned by Kirch Media, said Sunday it would not be affected by a Kirch Media bankruptcy as it is financed independently from the Kirch Group.

German Chancellor Gerhard Schroeder quickly made use of Kirch’s collapse to attack Bavarian Premier Edmund Stoiber, who is running against Schroeder for the nation’s top job in elections later this year. Schroeder said Stoiber was partially responsible for Kirch’s plight, adding that the state-run bank BayernLB helped finance Kirch’s money-losing pay TV venture.

BayernLB provided Kirch with nearly $1.75 billion in loans. Stoiber rejected the criticism, but political experts expect the premier to get pummeled by fallout from Kirch’s crash.