Norton Rose‘s capital markets team is basking in the limelight on a scale never enjoyed before as a result of its presence on one of the most bitter crises ever to affect the German media market.
The firm, which merged with Gaedertz’s Cologne office last year (and which later opened offices in Frankfurt and Munich) is advising at the heart of the Kirch Group saga, which threatens to engulf not only shareholders and investors but US investment banks, politicians, Formula 1, Spanish television, BSkyB and Germany’s largest newspaper publishing group Axel Springer Verlag.
Norton Rose is acting for a committee of undisclosed bondholders who hold over 25 per cent of the listed debt securities of ProSiebenSat.1, a German broadcasting company that is listed on the German stock exchange and which is controlled by KirchMedia, the privately-owned broadcasting unit of Kirch Group. The matter is an English law bond issue with huge German implications. The partner leading the deal in London is Christian Parker, who joined the firm from Linklaters in May 2001. Allen & Overy is acting for Bankers Trust, the trustee of the bonds, and Freshfields is acting for ProSiebenSat.1.
“We’re a relative newcomer in Germany,” said Rudiger Litten, capital markets partner at the firm’s Frankfurt office. “In terms of presence, we don’t belong with the established big players, but this gives us the opportunity to handle all sorts of cases in the future.”
In September 2001, a merger between ProSieben-Sat.1 and KirchMedia was announced. Kirch’s main aim was to float KirchMedia on the stock exchange by using ProSiebenSat.1’s listing. As Leo Kirch, owner of Kirch Group, has the majority voting control in both companies, the merger was believed to be a certainty. That was until the bond issuers revolted. Their gripe was the financial uncertainty of Kirch-Media and Kirch as a whole. It is now perceived to be against the investors’ interests for the merger to go ahead.
Under the terms of the j400m (£243.9m) eurobond deal, the investors are within their rights to block anything commercially unfavourable to ProSiebensat.1. “At the moment, it’s impossible to calculate a valuation of the company,” said Litten. “And we need to do that in order to merge.” The merger was postponed on 23 February 2002.
The troubles behind the Kirch empire are vast and convoluted. It is reported that Kirch owes a consortium of banks as much as $5bn (£3.5bn). The banks include the biggest creditor Bayerische Landesbank, as well as Deutsche Bank, Dresdner Bank (which has taken Kirch’s 25 per cent stake in Spanish broadcaster Telecinco), JP Morgan, Commerzbank, HypoVereinsbank, DZ Bank and Lehman Brothers.
It is believed that the banks are dealing with the legal aspects in-house apart from Lehman, which has retained Hengeler Mueller.
Kirch has also been forced to bring in two German heavyweight insolvency lawyers, Wolfgang von Betteray from Düsseldorf’s Metzeler van Betteray Buchalik and Klaus Hubert Görg from Görg Rechtsanwalte in Cologne, which is in alliance with DLA. Kirch has an agreement with BSkyB to return the £1bn invested by it in Premiere, Kirch’s major loss-making pay television arm, if so called upon. Kirch may have to sell his stakes in publishing company Axel Springer, Telecino and SLEC, the holding company that owns the television rights to Formula 1, in order to do this.
Kirch’s main adviser is Nörr Stiefenhofer Lutz, Macfarlanes‘ best friend in Germany. It is believed that the firm is acting as general adviser. Latham & Watkins is also believed to be involved. Shearman & Sterling is acting for Axel Springer and it is believed that BSkyB has instructed long-term adviser Christoph Wagner in the Munich office of US firm Hogan & Hartson.
A bondholder meeting is scheduled for 6 March. According to Litten, either the investors will call a default on the loan or the merger will be blocked completely.