Kirch's PPV Also Files for Insolvency

German Kirch Group's loss-making pay television unit says it has filed for insolvency after failing to renegotiate costly film and sports contracts or find fresh funds for its ailing operations.

The filing signals the demise of another key part of the Kirch empire, struggling with a mountain of debt, a month after its core film rights and broadcasting unit filed for insolvency.

It also comes hard on the heels of the failure of British digital terrestrial channel ITV Digital - a joint venture between Granada Media Plc and Carlton Communications Plc, and highlights the common problem of the cost of broadcast rights to soccer in Europe, analysts said.

However, the insolvency filing once again underscores the complex web of businesses created by Bavarian media mogul Leo Kirch. The filing does not include the actual German pay TV channel, Premiere World, which is held by a separate, wholly owned unit of KirchPayTV.

Analysts said the move could create scope to renegotiate some of the expensive movie and sports rights deals which have crippled the struggling pay TV operation, while enabling Premiere to remain on air.

They said KirchPayTV was likely to be tied into contracts with Hollywood studios and the German football association, which it could now seek to renegotiate. That would leave Premiere with income from the subscriber base of 2.4 million.

"The big advantage for Kirch is that the insolvency gives it more room to manoeuvre," said Markus Wallner, an analyst at HSBC Trinkaus & Burkhardt in Duesseldorf following media reports that insolvency was imminent.

"It's bad for the others who have contracts with Kirch."

Rupert Murdoch's British pay TV operation BSkyB, which owns some 22 percent of KirchPayTV, has an option to sell the stake back to Kirch for some 1.6 billion euros in October.

BSkyB said in a statement on Wednesday that it thought it was unlikely to receive a significant amount unless the liquidity issues surrounding Kirch and its Taurus holding company specifically were not resolved. BSkyB has already written off the stake in its accounts.

Lehman Brothers and private equity houses such as Saudi Prince Al-Waleed's Kingdom Holdings own 8.2 percent of KirchPayTV.