KTM Sets A New Course Forward

Reorganization plan still needs another €800 million

KTM’s creditors have accepted the company’s restructuring plan, creating a path to move forward and begin a return to full production. The plan was accepted just days before the February 27 deadline for KTM AG’s self-administration proceedings.

"I am grateful and happy today. KTM is back on track. Our employees have done everything over the last three months to ensure that the race can continue. We have closed an important chapter today,” says Gottfried Neumeister, chief executive officer of PIERER Mobility AG, the parent company of KTM AG. “But a single chapter never tells the whole story. Now we can continue the great story of KTM. We do it for the millions of KTM fans worldwide, to whom we are grateful every day. For our racers, of whom we are damn proud. And for our Austrian location, to which we are deeply attached in our hearts. KTM remains one of the top employers in the Upper Austrian industry."

Under the terms of the reorganization, creditors will receive a cash quota of 30% of their claims, which amounts to a total of €548 million (US$576.1 million), from KTM AG by May 23. Once that one-off payment is completed, the restructuring plan will need to be approved in court to become legally binding.

KTM AG will also receive a total of €50 million (US$52.6 million) from “an extended circle of shareholders” which will be used to ramp up production gradually starting in mid-March. The goal is to have four production lines running at full capacity in single-shift operation within three months.

While the restructuring plan charts a way out of its mess, KTM still has a lot of work to do. In addition to the €50 million from shareholders, the company still needs about €800 million (US$841.3 million) in new capital to finance the creditor’s cash quota and further ramp up production. Citigroup Global Markets Europe AG has been tasked with helping secure new investments.

Where that additional capital comes from remains to be seen. The rumor mill has raised names such as Bajaj (which is already a significant shareholder), CFMOTO (which already has a partnership with KTM), and Red Bull (which sponsors much of KTM’s racing programs), but so far, there are no signs that anything has actually moved forward. The new restructuring plan gives KTM AG time to figure that out, but the clock is ticking.

By Dennis Chung