A day before the May 23 deadline for financially troubled KTM to settle 548 million euros owed to its creditors, Bajaj Auto has announced its plans to take over operations at KTM.
This deadline was established following KTM’s approval of its restructuring plans earlier this year, whereby the company committed to paying off 30 percent of its total debt, which encompasses around 2,500 creditors. The total amount of debt stands at 548 million euros. Failure to meet this deadline would have initiated an irreversible insolvency process for KTM under Austrian law. It now appears that Bajaj Auto has intervened, potentially saving KTM from this fate and ensuring its continued existence.
Existing Bajaj Stake in KTM
Bajaj Will Increase Its Stake in KTM After This Takeover
Bajaj Auto has indicated that it will transition from a minority investor to the majority owner of KTM. However, the official statement does not detail the new ownership percentage following the completion of this takeover.
Bajaj’s relationship with KTM, along with their ownership dynamics, has evolved significantly over the years, resulting in a complex structure. Below is how the current Bajaj-KTM structure is organized, as detailed by Bajaj:
- Bajaj Auto Limited operates a wholly-owned subsidiary in the Netherlands known as Bajaj Auto International Holdings BV (BAIHBV).
- BAIHBV owns a 49.9 percent stake in Pierer Bajaj AG (PBAG) in Austria, with the remaining control held by Pierer Industrie AG, which is owned by entrepreneur Stefan Pierer.
- PBAG possesses approximately 75 percent of its listed subsidiary, Pierer Mobility AG (PMAG).
- PMAG is the holding company for KTM AG, the leading manufacturer of both off-road and street motorcycles marketed under the KTM, Husqvarna, and GASGAS brands.
- Prior to this transaction, Bajaj held an effective stake of roughly 37.5 percent in PMAG/KTM through the abovementioned ownership chain.
Bajaj’s KTM Rescue Strategy
800 Million Euros to Be Infused Into KTM by Bajaj
To facilitate the rescue of KTM, Bajaj’s wholly-owned subsidiary, Bajaj Auto International Holdings BV, has arranged a debt funding package amounting to 800 million euros. This infusion will support the payment of creditors and help revive KTM’s operational and working capital needs. Of this debt package, 200 million euros has already been provided to the company, with the remaining 600 million euros being arranged currently.
Additionally, Bajaj is addressing a recent situation involving one of KTM’s creditors, Dabepo Holding GmbH, by taking over the commitments under specific Loan and Share Pledge Agreements from Dabepo for an amount of 80 million euros. This move will prevent any potential foreclosure of the loan that could hinder KTM’s restructuring plans.
As mentioned earlier, the initial 200 million euros was provided to KTM by Bajaj through four payments of 50 million euros each, structured via Convertible Bonds/Loans over recent months.
For the remaining 600 million euros, 450 million euros will be secured through a term loan from BAIHBV, while the remaining 150 million euros will be issued as Convertible Bonds by PBAG, which BAIHBV will subscribe to. This funding will subsequently be loaned by PBAG to PMAG, which will ultimately provide the resources to KTM AG. The complexity of this ownership structure cannot be understated.
The Next Steps
Future of KTM Remains Uncertain
Bajaj has indicated that the immediate priority is to secure binding restructuring orders from the Austrian court to formally conclude the self-administration process and finalize the creditors’ agreements. Concurrently, applications to the Austrian Takeover Commission, Foreign Investment Control, and Merger Control Authorities are already being submitted for necessary approvals. Until these approvals are granted, the current control structure will remain in effect. Following a prolonged cessation of operations, production of motorcycles and supply of parts, clothing, and accessories is scheduled to recommence.
Fans of the KTM brand can breathe a sigh of relief knowing that a new future has been secured. Nonetheless, it is fair to anticipate that KTM will face a challenging recovery journey, likely leading to significant operational changes and possibly a redefined identity.
