Media scramble as Kirch goes bust

GERMANY has suffered its biggest corporate collapse as media group Kirch - holder of broadcasting rights to Formula One and the World Cup - filed for bankruptcy protection.

It is the fourth major German company to go bust in less than three weeks. Major creditor banks decided on Friday to pull the plug after weeks of talks. The Munich District Court confirmed today that a formal application seeking insolvency protection had been lodged by the company, which is £4.2bn in debt.

The four main creditor banks which include HVB Group and the state bank, have agreed on a broad framework to keep the healthy businesses of the company in operation. They will invite media businesses to help them in such a restructuring - which will involve inviting in media barons Rupert Murdoch and Silvio Berlusconi.

But the government is keen to keep out Murdoch, a minority shareholder in Kirch. Today BSkyB - 40% owned by Murdoch's News Corporation - said it still planned to sell its 22% stake in Kirch's pay-TV business Premiere back to the company in October under a put option. But there are several crown jewels in the Kirch empire that Murdoch and Berlusconi - and a third major player, Prince Waleed of Saudi Arabia - are keen to get their hands on. These include an extensive film library and a 40% stake in Axel Springer Verlag, publisher of Bild, Germany's most profitable newspaper.

But it is unlikely that any outsider will get the rights to broadcast the World Cup tournament, which Kirch bought through to 2006.

The German federal government has already pledged £130m to keep the domestic football league afloat, and at the weekend Edmund Stoiber, leader of Bavaria where Kirch is based and a challenger on the conservative-ticket for this year's general election, pledged that the group would not be broken up.

But sources say the banks believe they stand a better chance of recovering more than £2bn in outstanding credits if the profitable parts of the company are restructured. They would work with a court-appointed administrator to set up a new company to run the healthier assets in the Kirch portfolio - a move common among German bankruptcies.