A fierce battle is unfolding over the fate of motorbike manufacturer KTM, as a group of creditors led by US hedge fund Whitebox Advisors takes on India’s Bajaj Autos and Austrian business mogul Stefan Pierer, according to a report by the Financial Times.
The dispute over Austria’s restructuring laws could determine whether KTM’s lenders are forced to accept significant losses while shareholders retain full ownership.
KTM, which filed for insolvency in November, is proposing a restructuring plan that would grant creditors only €600m from €2bn in claims — a 70% haircut — while its shareholders, including Bajaj Auto and Pierer Mobility, would retain their full equity stake.
Under Austria’s insolvency rules, KTM is required to pay creditors at least 30% of their claims, the minimum legal threshold. If the plan succeeds, the company will wipe out €1.4bn in debt, while Pierer Mobility will seek up to €900m in new debt and equity financing to inject into KTM.
The creditor consortium though, led by Whitebox Advisors, is fighting KTM’s proposal, advocating for an alternative restructuring plan that would distribute losses more evenly between creditors and shareholders.
The Whitebox proposal would allow lenders to reinstate their debt at 45 cents on the dollar, instead of the 30 cents KTM is offering and provide creditors the option to extend up to €400m in new financing. It would also grant creditors a 20% equity stake in KTM.
However, KTM’s management has refused to engage with Whitebox’s proposal, according to the hedge fund.
The dispute has sparked criticism of Austria’s restructuring laws, which favour shareholders by allowing them to block alternative creditor-backed proposals. Even if Whitebox’s plan were formally introduced, KTM’s shareholders could vote it down, pushing the company toward bankruptcy.
The company’s court hearing on Tuesday in Ried im Innkreis will determine whether creditors accept KTM’s restructuring plan. If they reject it, KTM will be forced into bankruptcy, a move its administrator has warned could result in even lower payouts — just 15 cents on the dollar.
Whitebox and its allies argue that such a drastic cut does not accurately reflect KTM’s long-term prospects.
A Bajaj Auto spokesperson declined to comment, while KTM’s parent company, Pierer Mobility, has not yet responded.
