Halved profits at ProSieben pile on the agony for Kirch

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The Independent Online

Kirch, the crisis-hit German media group, yesterday faced fresh bad news as a key subsidiary reported a halving of profits. However, its pay-TV business that is fast running out of cash promised a restructuring plan.

A supervisory board meeting at KirchPayTV resolved to put in place a reorganisation plan for its Premiere unit which is losing $2m (£1.4m) a day. BSkyB, which has a 22 per cent stake in the division, sent a representative to the meeting.

"I can't say what the talks were about, but they were constructive and focused on a new plan for Premiere," a spokesman said, adding that KirchPayTV's chief executive Georg Kofler, who has been in office three weeks, is likely to present a plan to the group before Easter.

KirchPayTV is one of three divisions in the Kirch Group, which is struggling under debt of €6.5bn. The group overspent on rights for sport and films. It owes Sky €1.7bn under a put option which can be exercised from October. It remains unclear how Kirch will pay.

Stefan Weiss, an analyst at WestLB, said the break-up of Kirch, which some creditors had been pressing for, now looked less likely.

"It seems to me that banks are coming to the understanding that they should not split Kirch into parts and sell those off. They are trying to put together a debt-for-equity swap [instead]."

ProSiebenSat.1, the German free-to-air broadcaster in which Kirch has a 52 per cent stake, reported that 2001 profit had collapsed to €106m (£74m), from €205m the previous year. Debt jumped from €550m to €900m.

Kirch, which counts ProSieben as a subsidiary, is planning to merge the broadcaster with its KirchMedia rights business.

ProSieben last week admitted that the merger, planned for this summer, would have to be delayed. Yesterday, the conditions its management set out showed the deal was near impossible.

Urs Rohner, the chief executive of ProSieben, diplomatically said he was sure that Kirch would sort out its problems. But he made clear the merger could not proceed until this was done.

He added that the combined entity must be capable of retaining an investment grade rating, a prospect that has already been ruled out by the credit rating agencies.