HVB offers Kirch hope

February 12, 2002 Posted: 0950 GMT

LONDON (CNN) -- HVB Group, Germany's second-largest bank, plans to help debt-laden KirchGruppe by acquiring a stake in publishing house Axel Springer Verlag.

The Munich-based bank will pay 1.1 billion ($950 million) for Kirch's 40 percent stake in the country's largest publisher as part of wider move to restructure, the Financial Times reported on Tuesday.  

Leo Kirch, who built up the sprawling media empire over the last 50 years with help from Bavarian banks, has not yet agreed to the HVB offer. Kirch had previously said its stake in Springer, which publishes the influential German tabloid "Bild," was not for sale.

Speculation that the group may be broken up by creditors, leading to its assets falling into overseas hands has caused political turmoil in Germany and forced Kirch to think the unthinkable. The deal would offer the besieged media empire some breathing space.

"What we are talking about is an agreement between two gentlemen that one of them will get a determined amount for the asset," a source familiar with the proposals told the FT. "Kirch can take the offer or leave it but at least they are no longer under extreme pressure."

A deal would relieve pressure on Kirch, which owns Germany's biggest pay-TV group, the rights to World Cup football and Formula One. Kirch has built up a debt mountain of about $5 billion as losses at its pay-TV group grow.

Last week, Rupert Murdoch's British Sky Broadcasting (BSY) wrote off its investment in Kirch's pay-TV company but could still force Kirch to buy-back the 22 percent stake.   

Other creditors, including Deutsche Bank (FDBK) and Dresdner Bank (FDRB), want their money back. Kirch is planning to use part of the proceeds to pay back a 700 million to Deutsche Bank, Reuters said. Deutsche Bank asked for its money in December but later pushed the deadline to April.