Bajaj Auto To Takeover KTM, Invest A Debt Funding Package Worth EUR 800 Million
Bajaj Auto shared a statement regarding the takeover of operations at KTM AG. This news comes just before KTM is supposed to deposit EUR 548 million owed to debtors. The deadline was set to pay off 30% of the debt to 2500 creditors.
If KTM had not met the deadline, it would have irrevocably moved into an insolvency process. Bajaj Auto seems to have rescued the Austrian brand from that point.
Bajaj-KTM Ownership Structure
Bajaj Auto stated that it will now become a majority stakeholder from a minority stakeholder. However, we don’t know the extent of this ownership status at present. The Bajaj-KTM structure is currently as follows:
- Bajaj Auto Limited has a wholly owned subsidiary in the Netherlands called Bajaj Auto International Holdings BV (BAIHBV).
- BAIHBV holds a 49.9% stake in its associate, i.e., Pierer Bajaj AG (PBAG) in Austria. The remaining controlling stake in PBAG is held by Pierer Industrie AG, which is owned by entrepreneur Stefan Pierer.
- PBAG holds a ~75% stake in its listed subsidiary, Pierer Mobility AG (PMAG).
- PMAG is the holding company of KTM AG (KTM Business), the leading manufacturer of off-road and street motorcycles marketed under the marquee brands of KTM, Husqvarna and GASGAS.
- Before this transaction, Bajaj effectively held ~37.5% of PMAG/KTM through the above chain.
Debt Funding Package
BAIHBV has arranged a debt funding package of EUR 800 million for the Austrian brand to continue its operations. They will utilise this package to pay off creditors, revive the company’s operations, and working capital cycle. Over the last few months, EUR 200 million has already been used for the same in instalments of EUR 50 million via convertible bonds/loans.
It is important to note that EUR 450 million will come in the form of a secured loan from BAIHBV. PBAG will issue convertible bonds, and BAIHBV will subscribe to them for the remaining EUR 150 million. The amount will be loaned by PBAG to PMAG, eventually funding KTM AG.
One of KTM’s creditors, Dabepo Holding GmbH, is also handled by Bajaj Auto. BAIHBV took over the commitment under the loan and share pledge agreement from Dabepo Holding GmbH for a price of EUR 80 million. This process effectively stopped the threatened foreclosure of this loan, preventing KTM’s restructuring.
Future Of KTM AG
According to Bajaj, it is important to attain binding restructuring orders from the Austrian court to end the self-administration process and settle the creditors’ quota. The applications have been filed with the Austrian Takeover Commission, Foreign Investment Control, and Merger Control Authorities for approval.
The current control setup will be in place until the approvals are attained. It is expected that the factory will commence production of bikes and accessories for the market after a long wait. KTM’s future will be fascinating to observe under Bajaj’s ownership and whether they are able to return to their former glory years.
