The US-based constructor, Katerra Inc, went bankrupt with approximate liabilities ranging from $1 billion to $10 billion and assets between $500 million to $1 billion.
Katerra lodged for insolvency protection in the Southern District of Texas court under Chapter 11 Lawsuit on the 6th of June. As funded by SoftBank, Mickael Mark's startup has become the Japanese Group's second-largest subsidiary to go into debt this year.
The company said it has applied for creditor protection due to a dramatic worsening of financial status in its announcement. It accused Covid-19 and Greensill Capital (Katerra's previous investor) of its "unanticipated insolvency" and failure to acquire new finance for this situation. Katerra also stated that it would go through a marketing and sales process in order to optimize value for its shareholders.
The collapse is the latest blow for SoftBank's Vision Fund, which has lately reaped the benefits of portfolio company debuts, including Coupang and DoorDash. As per sources, the Vision Fund had injected over $2 billion in Katerra, along with a cash infusion in December for its recapitalization. The refund was made to obtain smaller companies; however, those firms proved to be challenging. Moreover, Katerra was forced to comply with construction delays and difficulties while refining its construction modules.
Katerra was established in Silicon Valley with the goal of lowering construction expenses by creating construction materials in factories instead of on-site. Nonetheless, the corporation has battled to keep costs under control and has experienced delays on some major projects. In addition, internal strife forced co-founder Michael to resign as chief executive in May of the previous year. The firm claimed it had acquired $35 million in debtor-in-possession funding from SoftBank, enabling it to proceed with its operations while the insolvency process completes. And, it conveyed that the liquidation would have no impact on its overseas activities. Renovations and Lord Aeck Sargent architecture business units have also been committed to private investors, pending Bankruptcy Court permission, as reported by Katerra.
Confirming to court documents, Katerra generated 1.75 billion dollars in income the year before. LinkedIn shows it employs 2400 individuals, whereas, in February 2020, its marketing campaigns boasted 8,000 employees throughout the world. Even after receiving $865 million from backers the prior year, Katerra announced that it would shed 200 jobs in 2019. On top of it, the corporation closed manufacturing in Phoenix for the sake of concentrating on a more high-tech operation in California. Apart from the USA, the business is functioning in India and Saudi Arabia.
The failure of Katerra has strained relations between SoftBank and Credit Suisse, which marketed funds including loans made by Greensill. Credit Suisse is attempting to recoup $440 million in Katerra-related debts stored in the accounts. According to the reports, after the downfall of Greensill, the Swiss bank is looking for potential action over SoftBank, one of its main clients. Greensill received an emergency cash infusion from SoftBank last November to settle Katerra arrears. The money, on the other hand, never made it to the Credit Suisse accounts as planned.
Katerra plans to submit formal petitions with the Bankruptcy Court, requesting permission to pay existing workers, suppliers, and others in the normal course of business. It has appointed Kirkland & Ellis as a legal representative, Alvarez & Marsal, and Houlihan Lokey as a finance consultant and an investment manager. The tech-driven construction firm has made this collaboration to assist its leadership team on a sales and marketing strategy for its properties to maximize value for its financiers and to ensure a peaceful wind-down of the company.
Previously, Katerra was ranked as the Top Startups in the Linked-in list and has gained huge fame in mass timber construction.