KTM: Creditor Agency Says Reorganization Plan Includes Quitting GP Racing

Yesterday at 12:20 PM

Financially troubled KTM will withdraw from Grand Prix-level road racing, according to a court document filed in connection with the company’s bankruptcy. 

Alpenlandischer Kreditorenverband, the agency representeding KTM’s creditors, posted a summary of a court hearing on Dec. 20 outlining the current state of the company’s restructuring efforts.

Among the statements included is the following: 

“In order to reduce costs, the withdrawal from MotoGP Moto3/Moto2 is planned.”

KTM issued a statement the same day stating that it would continue with new models into 2025. The statement did not specifically address Grand Prix road racing.

KTM expects to cut 300 jobs, down from the 500 initially forecast, is looking at relocating production to reduce costs and is looking for investors.

The next court hearing is scheduled for Jan. 24.

The entire court statement from Dec. 20 by Alpenlandischer Kreditorenverband reads:

Information on the 1st hearing in the insolvency proceedings of KTM AG

Today, the first creditors' meeting and report session in the insolvency proceedings of KTM AG took place at the Regional Court of Ried im Innkreis.

Content of a Reporting Session

The law stipulates that in the case of restructuring proceedings with self-administration, a first creditors’ meeting must take place within three weeks of the opening of the proceedings. The subject of the report meeting is the insolvency administrator’s report on whether the conditions for an immediate closure of the entire company or individual business areas or for a continuation are met, as well as whether a restructuring plan corresponds to the common interest of the insolvency creditors and whether its implementation is likely to be possible.

The Alpine Creditors Association (AKV) announces that the restructuring administrator, Attorney Peter Vogl, has advocated the continuation of the proceedings as a restructuring procedure with self-administration at today’s first creditors’ meeting, as this does not currently represent a disadvantage for the creditors in the context of an overall assessment.

During the report session, the insolvency administrator reported on the findings to date:
He is currently primarily busy reviewing the financial situation, assessing the appropriateness of the restructuring plan offer and processing challenges, liability and other claims, and several experts have already been commissioned.

The insolvent debtor is the central company of the KTM Group. In total, there are more than 60 subsidiaries.

According to the administrator’s report, cooperation with the debtor and all bodies of the debtor company is working well and all necessary information is provided promptly.

Self-administration

The company is currently being continued under self-administration.
None of the creditors present have requested the withdrawal of self-administration.

Continuation

The liquidity planning for the continuation of the company submitted by the insolvent debtor has been and will be validated by experts in the course of the insolvency proceedings and, according to current assessment, there is sufficient liquidity in the company until the time of the audit hearing.

The insolvency court decided in today’s session to continue the company and the decision will be published in the edict file tomorrow.

Liquidity

The liquidity for all three insolvent companies (KTM AG, KTM Forschungs & Entwicklungs GmbH and KTM Components GmbH) is to be ensured via KTM AG.

Regarding the general market situation in the production sector of the KTM Group, it can be stated that externally commissioned experts (market analysts) assume that the market is generally growing, but that the comparatively high production costs in Austria are affecting competitiveness.

In 2023, after the peak caused by the COVID pandemic, there was a decline in market demand.

According to the administrator’s report, the number of staff cuts required for the restructuring will be reduced from the originally planned 500 employees to probably less than 300 in all three insolvent companies. The restructuring administrator expressly emphasized in the report session that the wages and salaries of employees for December can be paid.

The financial plan submitted by the debtor is continuously monitored and adjusted by the restructuring administrator and experts consulted and can currently be adhered to.

At the same time as the insolvency proceedings were opened, a creditors’ committee was appointed by the insolvency court, of which the AKV is a member.

Causes of insolvency

An analysis of the causes of insolvency by court-appointed experts is being prepared and should be available as a basis for the creditors’ decision in good time before the voting day. This also applies to the mutual intra-group transfer payments.

So far, it has been found that the company has made high investments in the last two years, which were mainly financed by borrowed capital, so that liabilities have increased significantly.

Although sales from dealers to end customers have not increased sufficiently since 2023, production volumes have not been reduced. This led to high inventories, at the expense of liquidity.

The final reduction in production volumes in 2024 meant that the resulting fixed costs could no longer be covered, mainly because there were general increases in personnel, energy and material costs.

Reorganization measures

The insolvency administrator also reported on the reorganisation measures already initiated by the self-administered debtor.

The sale of the shares in PIERER IMMOREAL GmbH was published in the edict file and offered for sale.

Payments to subsidiaries of the KTM Group that are not essential to operations have been stopped. As a result, several subsequent insolvencies of other KTM companies are now expected. The two other KTM companies that are already insolvent are essential to the continued operation of the KTM Group and are being financially supported by KTM AG by continuing to purchase the services and goods from them.

In order to reduce costs, the withdrawal from MotoGP Moto3/Moto2 is planned.

In order to reduce production costs, the possibilities of (partial) relocation of production are being examined.

Production is to be halted until after the restructuring plan has been approved.

Clearance sales at retailers.

The first checks have already shown that the insolvent KTM companies will most likely not be able to provide the necessary funds to meet the quotas offered from their own resources or to generate them from operating cash flow.

Restructuring will therefore require the entry of an investor and, as has already been announced, KTM’s parent company Pierer Mobility has commissioned Citygroup Global Markets Europe AG (“Citibank”) to find an investor solution. A basic agreement and agreement with the potential investor is to be reached by mid-January; interested parties have already approached the restructuring administrator and the debtor.

Due to the complexity of this restructuring process, no serious assessment can yet be made as to the appropriateness or feasibility of the currently offered 30% restructuring plan.

Creditors can still submit their claims to the insolvency court via the AKV until the end of the registration period on January 16, 2025. In any case, it is advisable to register promptly, as the examination of the claims will take some time.

The next hearing will take place on January 24, 2025. During this hearing, the respective audit statements of the restructuring administrator and the debtor will be submitted with regard to the claims submitted by the creditors.

Claims can now be registered via the AKV.

AKV EUROPA
Alpine Creditors Association

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