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Startups

SoftBank-backed Katerra files for bankruptcy protection

US construction startup raised more than $1bn from Vision Fund

SoftBank-backed Katerra vowed to "redefine the construction industry." (Source photo from Katerra's website)

TOKYO -- U.S. construction startup Katerra has filed for Chapter 11 bankruptcy protection in a setback for Japan's SoftBank Group, which invested more than $1 billion in the company.

Katerra filed for relief in the U.S. Bankruptcy Court for the Southern District of Texas. It estimated liabilities of $1 billion to $10 billion, and assets of $500 million to $1 billion.

The company said it has secured commitments for $35 million in debtor-in-possession financing from a SoftBank unit and that its international operations are unaffected.

"The rapid deterioration of the company's financial position is the result of the macroeconomic effects of the COVID-19 pandemic on the construction industry, inability to procure bonding for construction projects following the unexpected insolvency proceedings of Katerra's former lender, and unsuccessful attempts to secure additional capital and business," Katerra said.

The company has taken loans from Greensill, another SoftBank-backed financial services company that filed for bankruptcy protection in March.

SoftBank reported a record 4.99 trillion yen ($46 billion) net profit for the year ended March, thanks to investment gains from the Vision Fund, its vehicle of close to $100 billion for tech investments. But Katerra's problems are a reminder that SoftBank remains vulnerable to setbacks.

The Vision Fund led a $865 million investment in Katerra in January 2018. Katerra vowed to "redefine the construction industry" and expanded into the Middle East and India, among other countries. Katerra said it raised another $200 million from SoftBank in May 2020.

But the company has struggled to take off. In December last year, Katerra shareholders approved a "recapitalization" plan of eliminating significant debt and another $200 million in funding from SoftBank.

In May, Chairman and CEO Masayoshi Son named Katerra alongside WeWork and Greensill as investment failures. "But what I regret more is the missed opportunities to invest," he said.

The debtor-in-possession financing announced by Katerra comes from SB Investment Advisers, SoftBank's U.K. subsidiary that manages the two Vision Funds.

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