Germany's Kirch group, one of Europe's largest media companies, faced almost certain ruin yesterday after last-minute talks with creditors and investors collapsed.
The company, at least €6 billion in debt, will file for bankruptcy in Munich early next week unless minority shareholders, including Mr Rupert Murdoch and Mr Silvio Berlusconi, agree to a bridging loan of €200 million.
"The investors were fighting over who gets what and, in the end, they decided they would rather let it collapse," said one source at the talks yesterday.
The Kirch empire includes Germany's largest private television company, the television rights to Formula 1 racing and a 40 per cent stake in Axel Springer Verlag, Europe's largest newspaper group.
If the company goes under, it would put back on the market the television rights to the next two World Cup finals. Kirch won a bidding war for the rights but FIFA, football's world governing body, is unlikely to ever see the €1.5 billion it was promised.
Already the Kirch collapse is being referred to as the "German Enron" because of the opaque finances of the privately held core company controlled by the 76-year-old company founder, Mr Leo Kirch.
Investors fear that the semi-blind mogul has mortgaged the company's most attractive assets several times over to finance his expansion plans.
His company, built up over 48 years into a multimedia empire, has nearly 10,000 employees. But it was destroyed by a pay-television venture in Germany that failed to attract subscribers and cost more than €1 million a week to run.
The impending collapse of the home-grown Kirch empire has shocked Germany and the bankruptcy could have untold consequences, both financial and political.
Some 60 per cent of Germans believe that Mr Murdoch and Mr Berlusconi would politically influence the German media if they took over Kirch's German assets.
Kirch owes the Bavarian State Bank more than €2 billion in loans organised by Mr Edmund Stoiber, the Bavarian prime minister and candidate of the conservative CDU/CSU for Chancellor in Germany's upcoming election. If Kirch defaults on the loans, it could destroy Mr Stoiber's chances of selling himself to voters as the politician to restart Germany's economic motor.
The collapse could also damage Germany's top football teams, which rely on more than €300 million in annual television rights from Kirch to pay their players.
The German government yesterday dismissed speculation that it would bankroll the clubs until a new buyer for the rights came forward.
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