Image: Michaela Handrek-Rehle/Bloomberg

Creditors of Austrian motorcycle maker KTM AG have approved a restructuring plan that will write off 70% of what they’re owed. The company now has three months to secure about €800 million ($840 million) of cash to finance the turnaround.

Citigroup is leading the fundraising effort and KTM parent Pierer Mobility has reported interest from several potential investors last month.

Management has spent the last three months since KTM filed for insolvency trying to convince creditors that the company-led plan proposing a 30% payout, job cuts and a temporary production halt is a better option than bankruptcy.

The company built by entrepreneur Stefan Pierer filed for insolvency after struggling to navigate the volatile demand for its motorbikes after the Covid-19 pandemic, leading to excessive inventories. It’s become the most prominent victim of headwinds to Austria’s ailing industry from rising energy and labor costs, risking thousands of jobs.

A group of banks hired Houlihan Lokey — an investment bank well-versed in creditor disputes — to advise on the insolvency. Hedge fund Whitebox Advisors put forward a restructuring proposal of its own, saying the company’s proposal represented an unfair transfer of value from creditors to shareholders.