Murdoch forced to deny interest in buying Kirch's pay-TV business

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Rupert Murdoch's BSkyB was yesterday forced to deny that it was looking to wrestle the pay-TV business from the wreckage of the Kirch empire.

KirchPayTV was only saved from having to follow the core KirchMedia division into insolvency on Monday because last-minute talks had been requested by an identified investor.

"After news went out that KirchPayTV would file for insolvency, one of the shareholders has made clear he wants to resume negotiations about a refinancing," Hans-Joachim Ziems, one of the two administrators appointed to KirchMedia, said on Monday.

Sky has a 22 per cent stake in KirchPayTV and it has long been speculated that Mr Murdoch wanted to take full control of this business, which is Germany's only pay-TV operation. Under a deal agreed in December 1999, Sky is owed €1.7bn (£1bn) from the main Kirch holding company.

Industry sources confirmed that Mr Murdoch's representatives were locked in talks with Kirch's creditors over the future of KirchPayTV, possibly with a view to take it over.

However, a Sky spokesman said it was focused on how to get its money. "We do deny interest in buying KirchPayTV," he said.

It remained unclear how Mr Murdoch thought he could extract the cash from the crippled Kirch group, which is saddled with €10bn of debt and contingent liabilities, prompting the speculation that he had another plan. In the absence of a break-through, KirchPayTV is thought likely to follow KirchMedia into insolvency shortly.

The fate of the third arm of the Kirch empire, KirchBeteiligung, which holds stakes in the newspaper publisher Axel Springer and Formula One motor racing, was also open to question.

KirchPayTV, started in 1996, has been blamed as the primary reason for the collapse of the Kirch empire, Germany's second-biggest media group. With 2.4 million subscribers but losses of about €1.5m a day, KirchPayTV's costs have always been out of control.

Other KirchPayTV shareholders are Kingdom Holdings of Saudi Arabia with 3.1 per cent, Capital Research Management with 2.7 per cent and Lehman Brothers with 2.4 per cent.

KirchPayTV needs "a new investor who has a better concept," said Wolfgang van Betteray, the other appointed administrator of KirchMedia.

Bavaria's conservative Prime Minister Edmund Stoiber, who is challenging incumbent Chancellor Gerhard Schröder in September's national election, yesterday said his government would offer no subsidies to Kirch, which is based in the region.

But Bavaria's partly state-owned bank BayernLB was revealed as having higher than expected exposure to Kirch of at least €2bn in loans.