Yes, you heard that right – following a vote at the regional court in Ried im Innkreis, Upper Austria, KTM's creditors have approved the company's reorganization plan. The entire amount of claims made against KTM was €2.25 billion (US$2.36 billion), of which €2 billion ($2.1 billion) has been acknowledged.
The approval, which was made public on February 25th, is an important part of the court restructuring process that KTM AG started when it went into "self-administration" last November. The process allowed the brand 90 days to reach a deal with its creditors – which has now been accomplished.
KTM’s creditors approved a €548 million ($576 million) restructuring plan, which in turn enables the company to resume production by mid-March and start making debt repayments. An estimated €50 million ($52 million) has secured the Austrian manufacturer's survival in the foreseeable future.
It’s been a roller-coaster for KTM, which found itself in financial limbo over the past few months. Staff layoffs, a production halt, the resignation of CEO Stefan Pierer, MV Agusta's sale, and scaling back in its factory racing programs all followed as a result.
Heck, even news of BMW wanting to buy a sizable stake in KTM broke out. This would have resulted in the relocation of production to Germany, causing severe repercussions for all current KTM employees in Austria. But given BMW's own financial concerns and a German recession engulfing the country, this seems highly unlikely.
One financial investor that is confirmed is India’s Bajaj Auto, which already owns 49.9% of KTM. It gave a loan of €50 million ($52 million) to KTM in order to kickstart production.
According to Pierer Mobility AG, creditors would get a one-time payment of 30% of their claims. By May 23rd of this year, KTM AG has to make the €548 million ($576 million) deposit with the restructuring administrator.
KTM AG's restructuring proceedings will come to an end when the restructuring plan is formally confirmed by the court in early June.
US hedge firm Whitebox Advisors opposed the said approval, as it had already purchased a significant proportion of KTM's debt in the hopes of putting pressure on the company to pay back more than 30% of the total loan. You could call this effort a partial success, considering KTM will have to pay the 30% within two months rather than the two years that Austrian law requires.
Within three months, Pierer Mobility AG intends to have four production lines operating at full single-shift capacity. That said, an additional €800 million ($841 million) in new funding is required for the cash quota and production, according to Pierer Mobility AG.
It's safe to say that things are not as they once were for one of the largest motorcycle companies in the world. It just goes to show how the tides can turn, even on the strongest. The likes of Harley need to be really careful.
For now, KTM lives on.
Source: Perrier Mobility AG
