KTM's initial restructuring plans have been approved by the insolvency administrator at the first court hearing held to discuss the process. The company can continue with its process of self-administration until the next hearing, on January 24th. KTM has also found investors prepared to inject €700 million into the company to keep it running.
According to Austrian broadcaster ORF, basing its reporting on the Austrian Press Agency APA, the court in Ried im Innkreis has approved the proposal by the insolvency administrator. ORF cites KSV insolvency expert Karl-Heinz Götze, who said that KTM can continue in its present form under Austria's self-administration process for bankruptcy protection.
The court rejected KTM's proposals on job cuts, reducing the total of job losses from 500 to 300, meaning that an additional 200 people will keep their jobs. The unpaid November wages and bonuses will be taken from the Insolvenz-Entgelt-Fonds IEF (Insolvency Compensation Fund) set up to protect worker wages in the case of bankruptcy. But these will only be paid out at the end of January. KTM workers will receive their December salaries as normal.
Investment found
Pierer Mobility's search for investors seems to have borne fruit, according to ORF. Creditreform, a European creditor protection firm, told the court that KTM had found three interested parties willing to invest €700 million in KTM. That is enough to keep the company running until at least the next court hearing set for January 24th, 2025.
What those investors are getting in return for that money is not clear. At some point, Pierer Mobility will have to clarify whether those loans will be granted in exchange for a share of the company, or whether they are just commercial loans to be repaid.
Production at KTM's factory has been halted until the end of February, in an attempt at clearing the backlog of unsold bikes. KTM reportedly has an unsold inventory of 130,000 bikes on its books. A large proportion of those bikes are not Euro 5+ compliant, which means they cannot be sold in Europe or the UK after January 1st, 2025, when the Euro 5+ regulations come into force.
Pierer Mobility boss Stefan Pierer did not attend the hearing. His co-CEO Gottfried Neumeister was present, but would not say anything to the assembled media, asking them for patience and understanding.
The financial restructuring means that creditors who accept the proposal will get 30% of their debts repaid. That KTM's larger creditors (in this case, banks) should be willing to accept that is understandable in light of the alternative. According to Creditreform, if KTM had been declared bankrupt, creditors would only have seen 13.87% of their money back.
What does this mean for KTM Racing?
The fact that KTM has been allowed to continue, and that Pierer Mobility has been able to find new investment means that at the very worst, a decision on the future of the separate Factory Racing company can be delayed until January. But it is a positive development for both KTM and for all of the projects involved.
KTM has always insisted that the racing project, including its MotoGP program, will continue as normal through 2025 and 2026. However, I understand that various cost-cutting measures have been introduced, including having team members share rooms, cuts to external projects and auxiliary services. KTM's MotoGP project will continue, but it will not be untouched by the parent company's financial situation.
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