A tumultuous final week in February for Pierer Mobility and KTM’s restructuring plan saw the Financial Times draw attention to a last-minute challenge by US hedge fund Whitebox – acting on behalf of an aggrieved consortium of lenders – to more fairly spread the pain of KTM’s insolvency between creditors and shareholders.
The plan pursued by KTM, which was duly voted through the regional court of Ried in Innkries on 25 February, only awarded creditors a payout of just 30% of their claims, in total worth slightly less than €600m, the legal minimum under Austria’s dodgy insolvency rules – effectively writing off about €1.4bn of debt while Pierer Mobility shareholders retained all of their equity in the business.
Creditors, led by several Austrian banks and the European Investment Bank, had also extended financing to KTM in a regional German private debt market known as the Schuldschien. Despite Whitebox’s intervention looking for a 45% payout, which failed owing to Austria’s flawed adoption of key European corporate legislation, they all had to accept major haircuts.
Pierer Mobility is now allegedly in a position to raise up to €900m of new money, to be injected into KTM via a combination of debt and equity. Existing shareholder Bajaj Auto, which recently valued its KTM investment at €470m, is expected to substantially increase its stake. With the insolvency court’s blessing and fresh investors, KTM’s factory at Mattighofen should be back in production during March. There are also rumours that BMW may be interested in acquiring some skin in the game. However, that could be spurious, given Munich’s finest have been there and done that before. Those of us with long memories can recall BMW briefly buying the Husqvarna brand from Cagiva – then dumping it on KTM.