Kirch Faces New Financial Pressures

The financial difficulties of German media giant Kirch Gruppe are set to intensify on Tuesday as a 460 million euros credit from Dresdner Bank falls due.

The deadline for settlement has already been extended once, having first expired in December.

All indications are that Kirch planned to finance the repayment of the loan with the proceeds from the sale of its 25% stake in Spanish independent television channel Telecinco, estimated to be worth around 500 million euros.

That sale was expected to be concluded by the end of 2001, but it hasn't yet come off.

According to people close to the Kirch group, negotiations with potential investors are continuing.

Industry observers point out that Telecinco is seen as one of Europe's most profitable tv broadcasters, and say they expect a successful conclusion to talks by the end of January, or at some point in February at the latest.

They believe that the buyer will be either Italian media conglomerate Mediaset or a Spanish company.

A spokesman for the Kirch group was unwilling to say anything about a possible divestment of the Telecinco stake or about any talks that might be underway on a solution for the credit.

According to information obtained by Berlin-based daily newspaper Der Tagesspiegel, Kirch has now resumed talks with its creditor, Dresdner. "The decision as to whether Kirch can repay the loan has not yet been taken," the newspaper reported.

Kirch's last financial injection came in December from the sale of a 1.28% stake in Italy's Mediaset, which brought in 120 million euros.

The Munich-based media group's most lucrative piece of business recently has been its trading in the television rights to the 2002 World Cup soccer tournament in Japan and South Korea.

The rights package, for which it paid 800 million euros, has been sold to most of the world's major television markets, bringing in a total of around 1.1 billion euros.

But the Kirch group's total gearing has been estimated by finance experts at 5–6 billion euros, and it faces further financial pressures from other quarters.

On Friday its loss-making Premiere World pay-television unit published disappointing figures for full-year 2001, showing its subscriber base to have risen by just 5% to 2.41 million people.

Depending on subscription charges levied, experts estimate that the unit will need to win over 3–3.5 million subscribers before it can go into profit.

Kirch's vice-president Dieter Hahn said Premiere World's losses last year topped 500 million euros.