SoftBank acquires majority stake in Katerra with $ 200 million bailout

SoftBank’s new investment will enable Katerra to avoid going bankrupt, according to Pater Kibsgaard, CEO of Katerra. The company needs SoftBank’s latest investment to continue as a going concern, he said in a notice to shareholders about the meeting on Wednesday.

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

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

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

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

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

Mr. Kibsgaard said in the interview that before becoming CEO, the company discovered financial practices that were not in line with generally accepted accounting principles, and launched an investigation. The investigation led to people being fired, he said. The irregularities were not material and did not require the company to review its results, he said.

In a statement, SoftBank said on Wednesday that Mr. Kibsgaard ‘addressed several operational inefficiencies and improved Katerra’s financial trajectory’ and that it ‘is committed to the company’s long – term vision and believes that the current leadership team has the ability to make this vision a reality. ”

Katerra expanded aggressively by acquiring other construction companies and factories in a number of cities. Michael Marks, a co-founder of Katerra who served as CEO before Kibsgaard, said in an interview in February 2019 that the company would be ‘cash flow neutral’ by the end of this year.

In a statement on Wednesday, Mr. Marks said: “I respect the support we have received from SoftBank, and wish them all the best and hope I can be of assistance.”

Mr. Kibsgaard said the company had tackled too many projects and side businesses in its earlier years. “I think we have greatly underestimated the complexity of executing self-performance projects on a large scale, including manufacturing and sourcing materials and managing our own labor,” he said.

The company has made significant job reductions in the US and plans to end unprofitable side industries and get rid of some leases, said Mr. Kibsgaard said. He said Katerra is on track to earn between $ 1.5 billion and $ 2 billion this year and expects to have positive cash flow in 2022.

SoftBank, best known for its $ 100 billion Vision Fund, has experienced several notable flops. In October 2019, the investment firm agreed to provide a lifeline to WeWork, after a failed initial public offering left the office-sharing firm at risk of running out of money.

But by balance, 2020 was a good year for SoftBank. It has made several successful investments and its shares are up more than 50% higher this year.

—Eliot Brown contributed to this article.

Write to Konrad Putzier at [email protected]