Indian motorbike maker Bajaj Auto plans to acquire a controlling stake in cash-strapped KTM and has lined up a debt funding package of as much as €800 million (R16-billion) that will save the Austrian company it has co-owned from bankruptcy.
Bajaj Auto has already infused €200 million (R4 billion) of debt support in the maker of MotoGP bikes, and will deploy the remaining amount ahead of a deadline to repay creditors, it said in a filing to exchanges in Mumbai Thursday.
The funding package includes a €450 million (R9 billion) secured-term loan to KTM and €150 million (R3 billion) in convertible bonds issued by parent Pierer Bajaj.
One of the largest two-wheeler makers in India will also take majority control of KTM as part of the multi-step deal.
The firm’s Netherlands unit, Bajaj Auto International Holdings, will acquire a sole controlling stake in Pierer Bajaj, which owns about 75% in Pierer Mobility, the listed holding company of KTM.
Bajaj’s unit currently holds a 49.9% stake in Pierer Bajaj.
The capital injection allows KTM to meet the requirements of a restructuring plan agreed by creditors in February intended to avoid the company’s liquidation.
As part of that overhaul, creditors of KTM and two affiliated companies agreed to take a 70% haircut on claims in exchange for a faster payout, by the end of May.
KTM’s restructuring plan in insolvency was not without creditor scrutiny.
US hedge fund Whitebox Advisors, who bought into the company’s promissory notes, also known as Schuldschein, significantly below face value, argued that the plan would allow existing shareholders to buy back into the company at a “massive discount.”
For Bajaj, the deal — subject to regulatory approvals — will put the company in charge of a prominent global motorbike brand after years of involvement as a minority shareholder.
Long-time chief executive officer and co-owner Stefan Pierer will step down.
KTM filed for insolvency in November last year after struggling to navigate the volatile demand for its motorbikes during the Covid-19 pandemic, which led to excessive inventories.
The company has been among the hardest hit in Austria’s industrial sector and its financial difficulties have risked thousands of jobs.
Bajaj Auto shares were fell 0.3% as of 1:29 p.m. in Mumbai on Thursday, paring this month’s advance to 7.7%.
Shares of Pierer Mobility extended gains on Thursday boosting an increase in May to 73%.
The Indian company said it will seek to resume production in Austria after months of stoppage, and boost KTM’s joint venture in India.
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