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June 9, 2021
Katerra, the troubled technology-enabled construction company, said in a news release that it has filed for Chapter 11 bankruptcy.
The filing was made on Sunday in Texas and involves the company and certain entities in the U.S. and Cayman Islands. It doesn't involve the company's international operations, according to the release.
Katerra said the filing comes as it is taking “steps to conduct a marketing and sale process to maximize value for its stakeholders.” It also said it secured commitments for $35 million in debtor-in-possession financing from SB Investment Advisers Limited of London to fund operations during the Chapter 11 process.
“While a number of negative factors have led to Katerra's current challenges, we are implementing initiatives on multiple fronts to maximize value and provide the best path forward for Katerra and its many stakeholders,” said Marc Liebman, chief transformation officer for Katerra, in the release. “Our multi-step action plan has rapidly evolved and includes consolidating U.S. activities, continuing our international businesses, advancing key asset sales, securing DIP financing, and commencing an in-court restructuring process. We are grateful to the extraordinary ongoing work and support of the Katerra team and other core constituencies through this extremely difficult time.”
In a court document, Katerra estimated its assets at $500 million-$1 billion and its liabilities at $1 billion-$10 billion.
The news release said the company is “currently proceeding with certain active projects in a number of states.” In Washington, Katerra last week filed a WARN notice with the state showing it planned to permanently lay off 117 workers in the Seattle area by last Friday. A company representative didn't respond to requests for comment.
The news release also said Katerra has entered into commitments for the sale of its Renovations and Lord Aeck Sargent architecture businesses to private buyers, subject to bankruptcy court approval.
The company said it intends to ask the bankruptcy court to authorize it to continue paying remaining employees, vendors and others moving forward. It said it recently notified key stakeholders that many of its U.S. projects will be demobilizing.
The news release said: “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's bankruptcy team includes Kirkland & Ellis, legal advisor; Houlihan Lokey, investment banker; and Alvarez & Marsal, financial advisor.
“Members of the financial advisor firm have assumed officer roles at the company and are working with regional business unit leadership to manage day-to-day operations,” the release read.
Website Prime Clerk lists the final hearing date for the case as July 12. The first hearing was held Monday.