SoftBank will get a majority stake in Katerra with a grant of 200 million dollars

SoftBank’s new investment will allow Katerra to avoid the need to seek bankruptcy protection, according to Katerra CEO Paal Kibsgaard. The company needed SoftBank’s latest investment “to continue as a continuing business,” he said in a notice to shareholders about Wednesday’s meeting.

As part of the financing package, financial services firm Greensill Capital, backed by SoftBank, has agreed to cancel about $ 435 million in debt owed by Katerra in exchange for a 5% stake in the company, Mr Kibsgaard said in a interview Wednesday.

Founded in 2015, Katerra has tried to compete with established builders by assembling building parts in factories and offering services such as plumbing and architecture under one roof.

But some of the company’s projects have been affected by delays and cost overruns, while its aggressive growth strategy and heavy debt burden have depleted its cash reserves. The Covid-19 pandemic, which delayed construction projects in some cities, added another challenge.

SoftBank, the world’s largest technology investor, was an early supporter of Katerra. The rescue program marks the second time this year that SoftBank has increased its investment in the company. In May, when Katerra’s board of directors called on Mr. Kibsgaard to become CEO, the startup secured an additional $ 200 million investment from SoftBank.

Katerra initially thought the money was enough, Mr Kibsgaard said in an interview, but later realized that a more serious restructuring was needed. Mr. Kibsgaard, the former head of oil services firm Schlumberger Ltd., has been hired as CEO with a mandate to repair the company’s finances.

Mr Kibsgaard said in an interview that before becoming CEO, the company discovered financial practices that did not comply with generally accepted accounting principles and launched an investigation. The probe led to the dismissal of the people, he said. He said the irregularities were not significant and did not force the company to resume its results.

In a statement on Wednesday, SoftBank said Mr Kibsgaard had “addressed more operational inefficiencies and improved Katerra’s financial trajectory” and remained “committed to the company’s long-term vision and believes the current management team has the capacity to to make this vision a reality. “

Katerra expanded aggressively by acquiring other construction companies and construction factories in several cities. Michael Marks, co-founder of Katerra, who served as CEO before Mr Kibsgaard, said in a February 2019 interview that the company expected it to be “cash-neutral by the end of this year”.

In a statement on Wednesday, Mr Marks said: “I really respect the support I got from SoftBank and I wish them all the best and I hope they can be helpful.”

Mr Kibsgaard said the company had taken over too many secondary projects and businesses in previous years. “I think we have underestimated the complexity of executing large-scale self-performance projects, including the production and supply of materials and the management of our own workforce,” he said.

The company has made significant job cuts in the US and plans to cancel its unprofitable secondary business and get rid of some of its leases, Mr Kibsgaard said. He said Katerra is on track to earn between $ 1.5 billion and $ 2 billion in revenue this year and expects to have a positive cash flow in 2022.

SoftBank, best known for its $ 100 billion vision fund, has experienced several high-profile flops. In October 2019, the investment firm agreed to offer a WeWork lifeline after a failed initial public offering left the office company in jeopardy.

But overall, 2020 has been a good year for SoftBank. It has received several successful investments, and its shares have increased by over 50% this year.

“Eliot Brown contributed to this article.”

Write to Konrad Putzier at [email protected]