SoftBank-Backed Construction Company Gets Bankruptcy Court Approval for New Loan

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The SoftBank Corp logo is pictured at a press conference in Tokyo, Japan on February 4, 2021. REUTERS / Kim Kyung-Hoon

  • Houston-based Katerra to use loan to fund sale process
  • SoftBank is a “reluctant” lender
  • The company closes 82 projects

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(Reuters) – Construction start-up Katerra, Inc, backed by SoftBank, has been granted permission to access part of a $ 35 million loan, also provided by SoftBank, to finance its operations during its bankruptcy and sale process.

US bankruptcy judge David Jones in Houston signed the loan on an interim basis in a virtual hearing Monday afternoon, a day after the company deposit for bankruptcy. The company has $ 1.55 billion in debt and about $ 3 billion in equity investments, most of which came from SoftBank. The company attributes its inability to control costs and project delays to its financial difficulties.

Katerra, represented by Kirkland & Ellis, will be able to provisionally access $ 25 million of the bankruptcy loan and will seek approval from Jones of the full amount in a hearing on July 12.

The Houston based company aiming to be an environmentally conscious company that uses new, sustainable technologies to construct apartment buildings with modular components assembled on site. Thanks to the bankruptcy, Katerra is looking to sell its main assets, which include facilities based in the United States, its so-called K3 construction platform, its operations in Saudi Arabia and its operations in India.

Katerra never made a profit and SoftBank, the company’s biggest investor, never saw a return on its investment in the company. Still, SoftBank, represented by Weil, Gotshal & Manges, agreed to provide a relatively small loan to fund a sale process, although Katerra’s lawyer Joshua Sussberg of Kirkland called it a “reluctant” lender.

The company’s bankruptcy comes months after a former lender and other SoftBank-backed entity, Greensill Capital, filed for its own insolvency proceedings in the US, UK and Australia.

Between 2019 and 2020, Katerra suffered losses of $ 2.78 billion. Additionally, the company identified “potentially inappropriate revenue recognition practices” in May 2020, which it voluntarily reported to the United States Securities and Exchange Commission. An SEC investigation into the matter is ongoing.

The company aims to get court approval for its asset sales in the first two months of bankruptcy. It also terminates 82 projects.

The case is In re Katerra Inc., US Bankruptcy Court, Southern District of Texas, No. 21-31861.

For Katerra: Joshua Sussberg and Christine Okike from Kirkland and Matthew Cavenaugh, Jennifer Wertz and J. Machir Stull from Jackson Walker

For SoftBank: Alfredo Perez, Gary Holtzer, Jessica Liou and David Cohen de Weil, Gotshal & Manges

Read more:

SoftBank-backed construction firm Katerra files for bankruptcy in the United States

From agriculture to finance, Greensill’s crusade sparked a supply chain reaction


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