If you haven't been following along as we cover KTM's current predicament, where have you been? For the uninitiated, KTM essentially screwed itself a couple years back, as Pierer Mobility AG—the company's parent company—went on a spending spree that'd make a lottery winner blush.
It bought everything, including new manufacturing facilities, new brands, and spent hundreds of millions on new motorcycles, parts, and gear. But it was all done at a time when the market was slowing down. When people stopped buying high-priced bikes and traded them for small-displacement, cheap motorcycles or just didn't buy anything new altogether. KTM essentially shot itself in the foot by not seeing the forest for the trees and, at present, is about $3 billion in debt, has a full year's worth of unsold motorcycles sitting on dealership lots, and is going through insolvency restructuring where it very well will likely get sold off to the highest bidder or broken up into parts.
Last week, it re-sold MV Agusta back to its most recent owners after less than a year of owning a controlling stake.
And now one of its creditors, one of the many, is accusing the brand's leadership of not responding in earnest to a proposed restructuring plan it put forth when the shit hit the proverbial fan months ago. Not good.
Bloomberg reports that Whitebox Advisors LLC, one of the company's many creditors, is accusing KTM of "delaying tactics" in its response to a plan the hedge fund put forth last year. "US hedge fund Whitebox Advisors LLC, which holds KTM promissory notes known as Schuldschein, claimed the company has failed to seek negotiations or respond to requests for information," says the outlet about a letter sent from Whitebox to KTM, adding, "In January, Whitebox proposed a restructuring plan that would offer at least 45% recovery for lenders, in comparison to the 30% envisaged by the company."
Additionally, the Whitebox proposal would allow all of the brand's lendors to offer up new financing, and all shareholders would be offered the chance to "participate in a capital increase," thereby giving them the financial lifeline that KTM needs. KTM, on the other hand, only currently want to raise the new funding themselves, leaving out companies like Whitebox. The brand is looking to currently raise $900 million in an effort to stay afloat.
The hedge fund also stated that it has support from a number of KTM's creditors for its plan and said it wouldn't vote for any restructuring plan in the coming weeks put forth by KTM. What does that mean? Well, if Whitebox has enough support amongst KTM's creditors as it says, and KTM puts forth a restructuring plan that gets punted, it could mean that KTM would be well and truly screwed. As in, KTM would likely be liquidated in order to meet its debt obligations. It could also just restart this insolvency affair, which would be worse for nearly everyone.
As for what happens now, we're in a wait and see point of the game. The brand is due to present a restructuring plan February 25th, which is where a vote will occur. If Whitebox Advisors LLC has enough ears and hands on its side, it could very well spell the end of KTM as we know it. So I suggest in the immortal words of Sam Jackson in the original Jurassic Park you all, "Hold onto your butts," it's gonna get even more messy and interesting.
