SoftBank-backed Katerra files for bankruptcy

Katerra, the US construction start-up backed by SoftBank’s Vision Fund, filed for bankruptcy with more than $1bn in liabilities, becoming the second leading company in the Japanese conglomerate’s portfolio to collapse this year.

In a statement, Katerra said it had filed for protection from creditors following a “rapid deterioration of the company’s financial position”. It blamed Covid-19, the “unexpected insolvency” of its former lender Greensill Capital and an inability to secure new financing. The company said it would undertake a marketing and sale process “to maximise value for its stakeholders”.

The bankruptcy marks the latest setback for SoftBank’s Vision Fund, which has recently enjoyed a strong run from the listings of portfolio companies such as Coupang and DoorDash. The Vision Fund had invested more than $2bn in Katerra, according to reports, including a cash infusion in December as part of a recapitalisation.

Katerra had been a client of Greensill, the SoftBank-backed supply chain finance company, which itself collapsed earlier this year. Katerra did not name Greensill in the statement.

Founded in Silicon Valley, Katerra raised billions of dollars in an attempt to reduce construction costs by producing building components in factories rather than on site. 

But the company has struggled to contain costs and has faced delays at several large projects. Internal drama led to the departure of co-founder Michael Marks from his chief executive role in May last year.

Katerra said it had received $35m of debtor-in-possession financing from SoftBank, allowing the company to keep operating while the bankruptcy process plays out, and its international operations would not be affected by the bankruptcy. The company estimated it had assets of between $500m and $1bn and liabilities of $1bn to $10bn. SoftBank declined to comment.

Court filings in the state of Texas showed Katerra made about $1.75bn in revenue last year. The company has almost 2,400 employees, according to LinkedIn. 

Katerra’s collapse has caused tension between SoftBank and Credit Suisse, which sold funds that packaged together loans originated by Greensill.

Credit Suisse is trying to recover about $440m in debts linked to Katerra that were held in the funds. The Financial Times reported last week that the Swiss bank is preparing for potential litigation against SoftBank, one of its major clients, following the collapse of Greensill.

In November last year, SoftBank provided an emergency cash injection to Greensill to cover debts at Katerra. However, the cash never reached the Credit Suisse funds as intended, the FT reported.

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