SoftBank obtains majority stake in Katerra with $ 200 million redemption

SoftBank’s new investment will allow Katerra to avoid having to seek bankruptcy protection, according to Katerra’s chief executive, Paal Kibsgaard. The company needed SoftBank’s latest investment “to keep it going,” he said in a notice to shareholders about Wednesday’s meeting.

As part of the financing package, Greensill Capital, a financial services company supported by SoftBank, agreed to cancel about $ 435 million in Katerra’s debt in exchange for a nearly 5% stake in the company, Kibsgaard said in an interview in Wednesday.

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

But some of the company’s projects have been hampered by delays and excessive costs, while its aggressive growth strategy and high debt load have depleted its cash reserves. The Covid-19 pandemic, which delayed construction projects in some cities, added another challenge.

SoftBank, the world’s largest investor in technology, was one of the first to support Katerra. The bailout marks the second time this year that SoftBank has increased its investment in the company. In May, when Katerra’s board chose Mr. Kibsgaard as CEO, the startup secured an additional investment of $ 200 million from SoftBank.

Katerra initially thought the money was sufficient, Kibsgaard said in the interview, but later realized that more serious restructuring was needed. Mr. Kibsgaard, the former head of oil services company Schlumberger Ltd., was hired as CEO with a mission to fix the company’s finances.

Kibsgaard said in the interview that before becoming CEO, the company discovered financial practices that did not comply with generally accepted accounting principles and started an investigation. The investigation resulted in the dismissal of people, he said. The irregularities are not material and do not compel the company to present its results, he said.

In a statement on Wednesday, SoftBank said that Mr. Kibsgaard “addressed several operational inefficiencies and improved Katerra’s financial trajectory” and that he remained “committed to the Company’s long-term vision and believes that the current leadership team has the ability to make that vision a reality. “

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

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

Kibsgaard said the company took on many side projects and businesses in the early years. “I think we underestimate the complexity of running large-scale self-execution projects, including manufacturing and supplying materials and managing our own work,” he said.

The company has made significant job cuts in the United States and plans to close unprofitable businesses and get rid of some of its leases, Kibsgaard said. He said Katerra is on track to make between $ 1.5 billion and $ 2 billion in revenue this year and expects to see positive cash flow in 2022.

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

But overall, 2020 was a good year for SoftBank. It has profited from several successful investments and its shares have risen more than 50% this year.

—Eliot Brown contributed to this article.

Write to Konrad Putzier at [email protected]