[A-List] Germany: Kirch crisis

["Keaney Michael" <Michael.Keaney@xxxxxx>]

For social democrats concerned that Deutschland AG and the "social
dimension" be preserved in years to come, the last thing they should
wish for is a Social Democrat victory in this year's elections, if this
article is anything to go by...


Stoiber turns up heat on chancellor over Kirch
By Bertrand Benoit in Munich
Financial Times: April 10 2002

Edmund Stoiber (left), the Bavarian prime minister, on Tuesday launched
his most bitter attack to date on Gerhard Schröder, the German
chancellor, in a move to prevent the collapse of Kirch Gruppe from
undermining his bid as conservative candidate in this year's national
poll.

Meanwhile, the fate of Premiere, Kirch's heavily loss-making pay-TV
unit, remained uncertain as its management was locked in talks with
minority shareholders, including Rupert Murdoch's BSkyB, about a joint
takeover of the unit.

Mr Murdoch has a E1.7bn ($1.5bn) option to force TaurusHolding, the
group's holding company, to buy his 22 per cent Premiere stake in
October.

The option could be swapped for equity in Premiere, but BSkyB on Tuesday
said it was not interested in injecting new funds into the unit.

Premiere is expected to file for insolvency in the next few days, but
this would not be incompatible with a plan by minority shareholders to
take control of the business.

The filing for insolvency this week by Kirch's core KirchMedia rights
and free-TV unit, the biggest German corporate failure in 50 years,
became a central issue of the election campaign after Mr Schröder
accused Mr Stoiber's government of "incompetence" in its support to the
group.

Speaking at a heated extraordinary session of the Bavarian parliament,
Mr Stoiber on Tuesday blamed Mr Schröder's economic policy for
contributing to Kirch's collapse and defended his record in turning
Bavaria into the media capital of Germany and its economic powerhouse.

"Those who have made Germany the slowest growing economy in the whole of
Europe . . . have lost the right to criticise Bavaria in this manner,"
Mr Stoiber said.

Mr Stoiber's closest lieutenants also blamed Mr Schröder for
precipitating the collapse of KirchMedia by alienating international
investors in a failed attempt to engineer a "German solution" to the
crisis.

"Schröder and [Wolfgang] Clement [prime minister of North-Rhine
Westphalia and a close ally of the chancellor], have actively and
irresponsibly not only undermined the search for a solution, but also
perhaps prevented it," said Kurt Faltlhauser, Bavaria's finance
minister.

Mr Faltlhauser rejected accusations that the Bavarian government had
pressed Bayerische Landesbank, which is 50 per cent owned by the
Bavarian state, into providing loans to the group. He denied the Kirch
collapse would damage the Landesbank's capital adequacy ratios and its
corporate lending activity.

"The Landesbank's loans to Kirch were given after careful internal
auditing . . . and were not handled differently from any other credit to
a similar-sized company," said Mr Faltlhauser, who sits on the bank's
supervisory board and is vice-chairman of its credit committee.

Bayerische Landesbank is Kirch's biggest lender with E1.9m in loans on
its books.

Full article at:
http://news.ft.com/ft/gx.cgi/ftc?pagename=View&c=Article&cid=FT3SMS53UZC&live=true&useoverridetemplate=ZZZUGORQ00C&tagid=IXL2N79UICC&subheading=europe

Michael Keaney
Mercuria Business School
Martinlaaksontie 36
01620 Vantaa
Finland

michael.keaney@xxxxxx