KTM Faces Critical Deadline for Creditor Payments

KTM is set to make a crucial payment of 30 percent of its outstanding debts to creditors by May 23, amounting to nearly EUR600 million. The company has yet to disclose how it plans to secure these funds. Currently, operations at the Mattighofen plant are halted due to a shortage of components. While stakeholders are attempting to maintain a positive outlook, the success of the company's recovery remains uncertain.

Last year marked a turbulent period for KTM and its parent company, Pierer Industrie AG. Initially appearing strong, the company faced a series of layoffs and financial setbacks. By late November, Pierer Industrie AG initiated a European restructuring procedure--a novel pre-insolvency process. Shortly thereafter, KTM AG, along with its subsidiaries, entered into restructuring procedures, leading to a three-month suspension of production accompanied by salary reductions.

During a creditors' meeting in January, approximately 1,200 creditors reported claims totaling around EUR2.2 billion. In February, these creditors agreed to a restructuring plan that stipulates they will receive 30 percent of their claims in cash. Despite multiple financial injections from Indian co-owner Bajaj to secure the continuation of operations, production was again scaled back at the beginning of May. This decision stemmed from disruptions in the supply chain caused by the ongoing insolvency, resulting in a lack of necessary components.

As a result, the plant will remain inactive for an additional three months, with employees set to receive pay for only 30 hours per week. There is hope that production can resume thereafter, contingent on creditors receiving their payments by the deadline. However, this hinges on finding an investor, as the ongoing search for potential investors is experiencing delays.

Efforts to raise capital through an anticipated equity increase have stalled, although shareholders approved the pledge of KTM shares held by the company at a recent general meeting. This measure aims to generate funds necessary to meet the creditor payment requirements.

Recent tensions have also surfaced between Stefan Pierer, the long-standing CEO of KTM who has since stepped back, and Stephan Zöchling, who holds multiple positions within Pierer Industrie and is viewed as a potential investor in KTM. Reports indicate that Pierer has pledged shares to Zöchling's Dabepo Holding, which is now seeking to liquidate them for EUR65 million due to non-repayment. Pierer may pursue legal action to contest this move.

In contrast, Pierer's investment in the firefighting equipment supplier Rosenbauer has proceeded as planned. The consortium, which includes Pierer, Red Bull heir Mark Mateschitz, and two firms affiliated with Raiffeisenlandesbank Oberösterreich, now holds approximately 55 percent of the company.