KirchMedia files for insolvency

Leo Kirch loses control of KirchMedia, part of the empire he built over 47 years

MUNICH, Germany -- KirchGruppe's core business, KirchMedia, filed for insolvency on Monday, ending weeks of speculation over the fate of the debt-laden group.

The move comes after Kirch creditors and shareholders failed to agree on a rescue plan for the group. The insolvency filing by KirchMedia is seen as a threat to the survival of the whole Kirch empire, prompting a possible break up and sale of other assets.

But a spokesman for creditor banks indicated on Monday that the group would come out of the current crisis intact.

"This not an end point but a turning point," Wolfgang Hartmann told a news conference in Munich on Monday. "We want to pull ourselves out of this current position."

MORE STORIES • Profile: Leo Kirch  • Kirch, another setback for German banks  • Kirch's media empire crumbling

A court-approved insolvency, similar to Chapter 11 bankruptcy protection in the United States, places a company under administration while it attempts to reach agreement with its creditors.

Last-ditch rescue talks reportedly failed over approval of a critical bridge loan of 150 million euros ($131 million).

The loan would have allowed the group to keep operating while negotiations continued on a 800-million euro rescue package, which had been expected to give minority shareholders control of group's core business KirchMedia.

KirchGruppe had been attempting to restructure 6.5 billion euros ($5.72 billion) of debt, much of it built up by KirchMedia, which owns the rights to the 2002 and 2006 World Cup football tournaments and has a majority stake in German broadcaster ProSiebenSat1.

Leo Kirch, 75, who built up the group over the past 47 years, through a separate company also owns the broadcast rights to Formula One motor racing and a 40 percent share of Bild newspaper publisher Axel Springer.

Axel Springer is now seen as a possible investor in any restructuring of KirchMedia.

The failed rescue talks involved creditor banks and minority shareholders -- including News Corp's Rupert Murdoch and Italian Prime Minister Silvio Berlusconi, who also owns his country's main private broadcaster Mediaset.

It is not known if the two media moguls will participate in a KirchMedia restructuring.

KirchGruppe employs between 9,000 and 11,00 people. About 3,000 work for KirchMedia.

Some analysts are still optimistic that Kirch can work out a deal with its creditors. Politicians are also anxious to find a solution with a national elections -- in which the survival of Kirch has been a hot issue -- only a few months away.

If KirchMedia goes under "then Bavaria would lose about 3,000 jobs and it would be concerned that Bavarian banks would lose lots of money," Hans Redeker, an analyst at BNP Paribas, told CNN.

"So that means the government and the opposition are working in the same direction. Both have an interest that the KirchMedia group will be maintained."