Germany's Helkon Media AG has filed for insolvency proceedings at the Munich insolvency court, the company said today (August 2).

The insolvency is expected to be one of the largest of the Neuer Markt companies, amounting to hundreds of millions of Euros. The move was a shock to staff, who were unaware of the development late yesterday.

Helkon said the aim of the proceedings is to find a solution that preserves both jobs and customer relationships. The company said it had been in intensive talks with potential partners and investors, but financing for a restructuring plan couldn't be secured. The final blow appears to have been big-budget flop Rollerball, on which Helkon was a producer and to which it committed heavily against German rights

While Helkon Media's turnover increased by 48% in the first nine months of the last financial year to Euros 145m, its earnings from usual business activities plummeted to a loss of Euros 21.9m, compared to Euros 3.1m in 2001. Write-downs of Euros 10m were made on the group's film library after the value of pay TV rights in Germany fell from 15%-25% of the license value to 5%.

Helkon SK, the company's UK distribution arm, played down the impact on its business. Helkon SK co-founder Simon Franks, who has been trying to engineer a management buy out for months even before today's news, told that Helkon would have to sell its shares to him personally. Franks said that he and Helkon SK co-founder Zygi Kamasa would end up owning 100% of the business, changing its name and continuing to run as an independent business.

"It's really sad," Franks said. "Werner [Koenig, Helkon's late co-founder] would be absolutely gutted today."

"At the same time, it won't affect us at all. Helkon are a shareholder in us. If a shareholder in Marks & Spencer's goes bust, it does not affect Marks & Spencer's."

Helkon SK has been operating successfully for more than a year without investment from its parent. The company expects pre-tax earnings to hit $10m for last year, fuelled by The Gift and Jeepers Creepers. Helkon SK is expected to beat that this year as cash from runaway UK hit Bend It Like Beckham comes in.

Helkon SK has long been looking to expand into Europe. At Cannes it bought French rights to Bollywood Queen.

"It's true that we have decisively made progress with putting Helkon Media back on its feet again, but we are operating in the license trading field in a considerably changed market environment after the collapse of other large German media companies", declared Mark Ramaker (pictured), Helkon Media's CFO. "Without a broader financial basis we cannot complete the successfully launched process of restructuring in the present economic situation".