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SoftBank-backed construction company nets bankruptcy court approval of new loan

4 minute read

SoftBank Corp's logo is pictured at a news conference in Tokyo, Japan, February 4, 2021. REUTERS/Kim Kyung-Hoon/File Photo

  • Houston-based Katerra to use loan to fund sale process
  • SoftBank is 'reluctant' lender
  • Company to close 82 projects

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(Reuters) - SoftBank-backed construction startup Katerra, Inc has secured approval to access part of a $35 million loan, also provided by SoftBank, to fund operations during its bankruptcy and sale process.

U.S. Bankruptcy Judge David Jones in Houston signed off on the loan on an interim basis during a virtual hearing on Monday afternoon, a day after the company filed for bankruptcy. The company has $1.55 billion in debt and around $3 billion in equity investments, most of which came from SoftBank. The company blames its inability to control project costs and delays for its financial trouble.

Katerra, represented by Kirkland & Ellis, will be able to access $25 million of the bankruptcy loan on an interim basis and will seek Jones’ approval of the full amount at a hearing on July 12.

The Houston-based company aimed to be an eco-conscious enterprise that uses new, sustainable technologies to construct apartment buildings with modular components that are assembled onsite. Through the bankruptcy, Katerra is looking to sell its key assets, which include U.S.-based facilities, its so-called K3 building platform, its Saudi Arabia business and its India operations.

Katerra has never generated a profit and SoftBank, the company's largest investor, has never seen any 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, though Katerra attorney Joshua Sussberg of Kirkland called it a “reluctant” lender.

The company's bankruptcy comes a few months after a prior lender and fellow SoftBank-backed entity, Greensill Capital, filed its own insolvency proceedings in the U.S., the U.K. and Australia.

Between 2019 and 2020, Katerra incurred $2.78 billion in losses. Additionally, the company identified “potential improper revenue recognition practices” in May 2020, which it voluntarily reported to the U.S. Securities and Exchange Commission. An SEC investigation into the matter is ongoing.

The company is aiming to secure court approval of its asset sales in the first two months of the bankruptcy. It is also winding down 82 projects.

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

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

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

Read more:

SoftBank-backed construction firm Katerra files for bankruptcy protection in U.S.

From farming to finance, Greensill's crusade sparked supply chain reaction

Maria Chutchian reports on corporate bankruptcies and restructurings. She can be reached at maria.chutchian@thomsonreuters.com.

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