Citing a range of factors that have weakened its finances, Katerra filed for Chapter 11 bankruptcy protection in federal court in Houston on June 7.
In a statement published June 6, the firm, which served as a construction designer, contractor and suppler, said it will keep running with $35 million in debtor-in-possession financing from SB Investment Advisers (UK) Ltd. Projects that Katerra still has underway will proceed, it said. After that, the company will undergo an in-court restructuring and “an orderly wind down of its business.”
Katerra added that its international operations are not affected by these proceedings.
Founded in 2015, company leaders said it would "help transform construction through technology." Katerra offices ranged across the U.S. and as far as India, China and the Middle East.
In its bankruptcy filing, Katerra's recently appointed chief transformation officer, Marc Liebman, who is also a managing director at management consultant Alvarez & Marsal, notes that "over its six years in operation, the firm has raised close to $3 billion in equity investments but was unable to generate a profit."
Katerra expanded quickly, winning jobs and executing projects, the filing states, but lost money on many of those projects due to cost overruns. In particular, Liebman's filing states, a big source of the losses were promises to honor maximum price guarantees and discounts for certain legacy customers.
The Carrollton, Texas-based company reports having about 6,400 employees in all units of the company at the time of the bankruptcy filing, with 2020 revenue of roughly $1.75 billion. Early reports last week of the company's shuttering sent teams on ongoing projects scrambling, but Katerra said it plans to continue U.S. projects for the foreseeable future.
Like many industry firms, the COVID-19 pandemic disrupted supply and logistical networks used by Katerra. In its public statement, it cited the pandemic as well as “the 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,” as causes of the company’s financial deterioration.
Liquidity issues throughout 2020 led to a larger crisis immediately following the collapse of Greensill Capital in March, which had been providing funding to the company. According to the filing, Katerra's largest single investor, SoftBank Vision Fund, declined to invest further in the company in May, leading to several Katerra board members resigning and layoffs of about 730 employees.
SB Investment Advisers (UK) Ltd. is an affiliate of SoftBank, and the filing notes that Softbank Vision Fund is unlikely to receive any distribution from the bankruptcy proceedings.
Katerra has acquired several companies since its founding in 2015, and said it has already begun the procedure for private sales of several of its companies including design firm Lord Aeck Sargent, subject to the bankruptcy court’s approval. The company has also filed motions to continue paying its remaining employees and vendors going forward.