German media giant KirchMedia this morning (Monday April 8) filed for insolvency following the failure of weeks of refinancing talks.
While the company itself has yet to comment, North Rhine-Westphalia Premier Wolfgang Clement said that KirchMedia had made a court filing for insolvency.
The company will now be managed by a court appointed administrator who, in a fashion similar to America's Chapter 11 system, will try to salvage as much of the group as possible.
The company's bankers are expected now to outline details of a "German solution" that would keep parts of the company going and leave out Kirch's foreign minority investors News Corp, Mediaset and Kingdom Holdings.
The move into insolvency became necessary after the company and its former partners reached an impasse and rejected each other's rescue plans. The majority shareholders - essentially Leo Kirch and his family - rejected the proposal of a Euros800m capital increase put forward by News Corp and Mediaset that would see control of the company pass away from Kirch. The shareholders also turned down a separate proposal put forward by Kirch and which Mediaset branded "not suitable to solve the problems of the group."
The all-German plan has been hatched by the main creditor banks and could see the banks and publishers including WAZ and Axel Springer provide short term working capital. It is likely to have the support of the country's politicians who have long been wary of foreign companies operating on German soil.
But even so the "German solution" is likely to be an interim one. The banks have said that they do not wish to become operators of the Kirch businesses, which include Europe's largest film licence trading operations, pay-TV company Premiere and free broadcasters ProSieben and SAT1. One bank spokesman said it was "about an orderly insolvency which ensures the restructuring and survival of the KirchMedia assets." That may mean that media partners, such as News Corp and Mediaset, may be invited back to the negotiating table.
But this weekend's influential Der Spiegel magazine is claiming that Kirch and his chief executive Dieter Hahn had secured for themselves control of the lucrative World Cup soccer rights for 2002 and 2006 in a separate deal agreed with FIFA over the Easter weekend.