DECEMBER 13, 2001
Financial problems multiply for F1 rights holder Kirch
F1 commercial rights holder and media group Kirch sustained another body blow to its credibility today (13 December) when Rupert Murdoch's BskyB organization admitted it is poised to write off its $2 billion stake in the ailing German company which is battling against huge debts.
It is being speculated that Kirch could even collapse, enabling Murdoch to get his hands on the World Cup television rights for a knock-down fee. Kirch's dilemma might even enable Bernie Ecclestone, who sold 75 per cent of his SLEC empire to Kirch for around $2.4 billion, to purchase it back at a much lower price. Alternatively, Kirch could sell a proportion of his stake in SLEC to the car manufacturers, a move which might defuse the prospect of an independent Grand Prix series being established in 2008 after the expiry of the current Concorde Agreement.
According to the Daily Telegraph newspaper, a source close to Kirch and Sky reports that Tony Ball, the chief executive of BskyB has "all but given up on Kirch" whose indebtedness is estimated by London stock market insiders as to be in the region of $4.3 billion.
Under a deal signed two years ago, Sky had taken a stake in Kirch's Premier TV cable subsidiary and, as part of that arrangement, Sky has a put option which means it can demand Kirch buys the stake back from October 2002.
However, Sky now believes that it is unlikely Kirch will be able to meet its obligations, particularly as the Dresdner bank is reportedly demanding repayment of a $445 million loan by the end of this month.
It is also understood that there have been a number of disputes between Sky and Kirch over the latter's pay TV strategy, the German company only offering free set-top boxes on a limited basis, thereby restricting subscriber growth in a market that already has over 20 free-to-air channels. Kirch is loss making and BskyB incurred a $165m charge in the year to June 2001 for its share in those losses.
A spokesman for Sky commented; "There is no certainty that the resources of Kirch Holding will be sufficient to satisfy the put option if exercised." However yesterday Kirch announced that it had sold the Italian TV rights for next year's World Cup and the top 25 matches for the 2006 World Cup for $137 million. But this doesn't look good enough to balance the books.
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