Creditors accepted the restructuring plan proposed by KTM AG.
The agreement, outlined in a statement from parent company Pierer Mobility, compels the Austrian manufacturer to repay at least 30% of its debts. To fulfill the payments to its creditors, KTM must submit €548 million ($575 million) to the restructuring administrator by May 23.
Meanwhile, an extended group of shareholders will provide KTM with €50 million ($57 million) to ramp up production again. The phased resumption will begin in mid-March and KTM’s four production lines will reach full capacity within three months.
Team Orange now has a path forward, but its future has remained uncertain for months. Throughout the insolvency process, it’s been at odds with a group of creditors led by U.S. hedge fund Whitebox Advisors. That’s because the brand’s proposed 30% repayment rate is the minimum required under Austria’s insolvency laws.
Whitebox Advisors contended that KTM’s plan unfairly benefitted existing shareholders while forcing creditors to sustain substantial losses. That prompted the firm to promote its own plan.
Under the alternative proposal, KTM’s current shareholders would lose their equity in the company. (Although Stefan Pierer stepped down as the CEO of KTM and Pierer Mobility, he still advises current CEO Gottfried Neumeister). Creditors willing to provide new financing would gain 30% ownership of KTM. The remaining 70% would be split among the creditors still owed money.
The hedge fund was so against KTM’s plan that it implored other lenders to reject the proposal before yesterday’s reorganization vote. Those efforts ultimately failed, as creditors approved the restructuring plan and its 30% repayment rate.
While creditors filed €2.2 billion ($2.3 billion) in claims, the insolvency administrator only recognized €1.7 billion ($1.8 billion) of that total. The €548 million repayment sum suggests that the final claims total is just north of €1.8 billion (€1.9 billion).
KTM may have taken a big step forward but it’s not out of the woods just yet. It has to deliver the €548 million payment to the restructuring administrator before the court can deem the plan legally binding in June 2025.
