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CLAMOROUS - To cut costs KTM is ready to leave MotoGP, Moto2 and Moto3

This prospective emerged during the first hearing for insolvency proceedings. Racing would be an expense to be cut. But there is a but...maybe MotoGP will survive!

MotoGP: CLAMOROUS - To cut costs KTM is ready to leave MotoGP, Moto2 and Moto3

The first hearing in the insolvency proceedings involving KTM has been held. We reproduce the minutes below. The most important news is that to reduce costs KTM would be ready to withdraw from racing in MotoGP, Moto2 and Moto3.

But beware of the translation of this sentence: Um Kosten zu reduzieren, ist der Ausstieg aus MotoGP Moto3/Moto2 geplant. It might mean that they will only come out of Moto2/3.

Information on the first hearing of KTM AG's insolvency proceedings.

The first hearing of creditors and the minutes of the insolvency proceedings of KTM AG were held today at the Regional Court in Ried im Innkreis.
Contents of the minutes meeting:

The law requires that the first meeting of creditors be held within 3 weeks after the opening of the reorganization proceedings with independent administration. The subject of the hearing is the insolvency administrator's report on whether the conditions exist for the immediate closure of the entire company or individual divisions of the company or for its continuation and whether a restructuring plan is in the common interest of the insolvency creditors and whether its implementation is likely to be possible.

The Alpenländische Kreditorenverband (AKV) reports that at the first meeting of creditors held today, the insolvency administrator, Peter Vogl, spoke in favor of continuing the restructuring procedure with self-administration, as it does not currently represent a disadvantage for creditors from a general point of view.

The bankruptcy trustee reported on his investigations to date during the budget meeting:
At the moment he is mainly involved in reviewing the balance sheet situation, assessing the suitability of the reorganization plan offer, and working out claims, liability, and others; several experts have already been involved.


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 organs of the debtor company is working well and all the necessary information is being provided without delay.

Self-administration

The company is currently in self-administration.
None of the creditors present has requested the revocation of self-administration.

Continuation

The liquidity plan submitted by the insolvent debtor for business continuation has been and will be validated by experts during the insolvency proceedings, and according to current estimates, the company has sufficient liquidity until the date of the review hearing.

At today's hearing, the bankruptcy court decided to continue the company's operations, and the decision will be published tomorrow in the edict file.

Liquidity

Liquidity for all three insolvent companies (KTM AG, KTM Forschungs & Entwicklungs GmbH and KTM Components GmbH) must be secured through KTM AG.

Regarding the general market situation in the manufacturing sector of the KTM Group, it can be said that externally commissioned experts (market analysts) assume a fundamentally growing market, but that relatively high production costs in Austria are undermining competitiveness.
In 2023, after the peak of the COVID pandemic, there was a decline in market demand.

According to the administrator's report, the number of layoffs required for the restructuring will be reduced from the originally planned 500 employees to less than 300 in all three insolvent companies. The restructuring administrator specifically emphasized at the report presentation meeting that employees' salaries and wages for December can be paid.

The financial plan submitted by the debtor is constantly monitored and adjusted by the restructuring administrator and the consulted experts and can currently be met.

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

Causes of insolvency

An analysis of the causes of insolvency is being prepared by court-appointed experts and should be available to creditors in good time before the voting meeting. This also covers mutual transfer payments within the group.
So far, it has been established that the company has made high investments in the past two years, financed mainly with loan capital, which has led to a significant increase in liabilities.
Although sales from dealers to end customers have not increased sufficiently since 2023, production volume has not been reduced. This resulted in a high level of inventories, which had a negative impact on liquidity.

The final reduction in production volume in 2024 was not able to cover the fixed costs incurred, mainly due to the general increase in personnel, energy and material costs.

Reorganization measures

The bankruptcy trustee also reported on the reorganization measures already initiated by the debtor-in-possession:

The sale of shares in PIERER IMMOREAL GmbH has been published and put up for sale.
Payments to non-operating subsidiaries of the KTM Group have been cancelled. As a result, several subsequent insolvencies of other KTM companies are expected. The other two KTM companies, already insolvent, are essential to the continuation of the KTM Group and will be supported financially by KTM AG by continuing to purchase the services and goods they provide.
In order to reduce costs, an exit from (class) MotoGP Moto3/Moto2 is planned.
To reduce production costs, the possibility of (partially) relocating production is being considered.
Production will be suspended until the reorganization plan meeting.
Sale of stock at dealers

Initial analyses have already shown that insolvent KTM companies will most likely be unable to raise the necessary funds to meet the quotas offered from their own resources or operating cash flow.
A reorganization will therefore require the involvement of an investor and, as already announced, KTM parent company Pierer Mobility has engaged Citygroup Global Markets Europe AG ("Citibank") to find an investment solution. A basic agreement with the potential investor is expected to be reached by mid-January, and interested parties have already contacted the restructuring administrator and the debtor.

Due to the complexity of this reorganization process, it is not yet possible to make a serious assessment of the adequacy or feasibility of the currently offered 30 percent reorganization plan.

Creditors can still submit their claims to the bankruptcy court through the AKV until the end of the filing period on January 16, 2025. They are advised to file petitions as soon as possible, as the examination of claims will take time.

The next hearing will be held on January 24, 2025. At this hearing, the respective verification statements of the restructuring administrator and the debtor for the claims filed by creditors will be submitted.

Claims can be registered immediately through the AKV.

 

Translated by Julian Thomas

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