MV Agusta Restructuring Plan - $45 Million Debt
Troubling news out of a Varese this week; the exclusive Italian motorcycle company MV Agusta has announced a restructuring plan that is surely making investors more than a little nervous.
This certainly doesn’t mark the first time that a high-end Italian brand has faced financial issues. But for those of us who appreciate motorcycles from the boot-shaped country, this is concerning, mainly because it confirms industry rumors that have been flying for some time now.
In a press release this week by MV Agusta, the brand has stated that it's seeking an "arrangement of continuity." In basic terms, this alludes to a debt consolidation agreement. It’s a sign from the company that yes, it's aware of the dire situation, but cannot repay debts in full which, to our investigations, may be in the tune of roughly 40 million euros (about $45 million in MV Agusta USA terms).
Not to harp on the doom and gloom of the situation, but this statement arrived amid some great increases for the brand that has created icons such as the MV Agusta F4 and F3. According to MV, it has increased its turn over from 30 million to 100 million euros within the past few years, seeing the largest increase of 30% in 2014 alone.
This makes much sense. The effects of the U.S. housing market crash in late 2007 and a poor global economy had a significant impact on the motorcycle industry; people no longer had purchasing power. We’ve seen things subside a bit since then, and it comes as no shock that as the economy stabilized, so too did smaller brands like MV Agusta.
A positive uptick in the world economy certainly has helped with MV Agusta's stabilization, as well as financial support from Mercedes-AMG - 20 million euros in 2014.
This investment from AMG gobbled up 25% of MV Agusta’s shares, not to the degree that we saw happen to Ducati in regards to the Audi Group, which has had extremely positive effects after the reported $1.13 million Ducati buyout from Audi AG Automobili Lamborghini S.p.A.
The press release from MV Agusta assures that it'll battle it out in the coming months. This is mostly due to CEO Giovanni Castiglioni (son of Claudio) not wanting to renounce all control of the brand that his father helped build. But from a consumer standpoint, we have to wonder why MV Agusta is in the position it's in.
Smaller brands tend to have dealer network troubles, along with part distribution issues. Some of these issues can be forgiven, considering these smaller OEMs don't have the networks that the Japanese have fostered over the years. But that doesn’t translate into consumer confidence for the average man or woman wanting a motorcycle.
What we’ve seen in recent years from MV Agusta is a massive push to connect with the consumer, which has been successful. From rebranding and R&D that led to bikes like the MV Agusta Brutale, to expanding its networks, it’s safe to say that MV has not spent money frivolously. According to MV Agusta, the order book for 2016 is showing a 42% increase over last year’s number – more sales early in the year are an extremely positive sign.
Is it enough? We hope so. The motorcycle industry needs brands like MV Agusta - ones that are willing to create motorcycles that are undeniable works of art that function in modernity's standards. It keeps things fresh, and we suspect that we're not alone in the room when we say that many envy MV owners.
MV Agusta is one of the quintessential bedroom wall bikes, and always has been. Having the legendary Massimo Tambruini - the creator of other bikes such as the iconic Ducati 916 - on hand designing bikes for a good portion of his career made that claim easy – the MV Agusta F4 and F3 are simply gorgeous.
The brand made its history in racing - names like Giacomo Agostini, Phil Read and John Surtees built their careers aboard MV Agustas. As you can tell, this brand is near and dear to us.
Following is the official press release from MV Agusta:
Varese, 22 March 2016 – The MV Agusta brand, and the family heritage which has reestablished its presence internationally, is based on the values of passion, motivation, perfection and ambition. These values have led the company to close 2015 with a turnover of 100 million euro together with an increase of 30% over the previous year.
Our bikes have become the undisputed icons demonstrated with a 30% sales growth rate compared to a 12% market growth. To create improved visibility, content and the greatest potential possible in emerging markets, we have invested more than 15% of the annual turnover in Research & Development, to enter new segments and ensure undisputed excellence in terms of quality and performance standards that fans expect from this
Without this continual innovation, investment and entrepreneurial passion, the Made in Italy, of which MV Agusta represents the “upper-premium” segment in the two-wheeler market, would not exist. In recent months it has been reported through the press the news regarding the necessary financial needs in MV Agusta to sustain this organic growth.
MV Agusta has decided to hold its ground together with the employees and its creditors by means a composition with creditors proceeding to request continuity that will allow the company to be able to restructure and generate positive growth returns for its stakeholders.
MV Agusta is a company with tremendous potential, as demonstrated by the trend of the last five years, with a growth from 30 to 100 millions of turnover, in the unique unmistakable nature of its products and especially in its reinforced Italian identity. We are currently a company that is continually growing, boasting a strong order book for 2016 and a backorder generated by new models which marks an increase of 42% over the previous year, as well as improved sales of +36% for March 2015.
With the active involvement of all its employees and a reinforced management structure, MV Agusta has already identified the strategy aimed at consolidating and strengthening corporate values, as well as the protection of the company’s stakeholders. We are confident that – overcoming the current situation of financial liquidity – our company will recover and achieve economic results that satisfy the expectations of our employees and our creditors.