SoftBank Group would invest $ 200 million to bail out Katerra, a startup that hoped to remake the construction industry with a vertically integrated approach, according to a Wall Street Journal report.
Katerra shareholders are said to have approved the new investment on Wednesday, with SoftBank’s new lifeline adding to around $ 2 billion that the Japanese tech conglomerate had already committed to the company.
Funds for the bailout, which will save Katerra from bankruptcy, will come from SoftBank’s Vision Fund 1, Katerra chief executive Paal Kibsgaard told company shareholders in a message.
As part of the financing, SoftBank-backed financial services firm Greensill Capital is forgiving about $ 435 million in debt in exchange for a 5% stake in the company, according to the Journal report.
This new bailout actually marks the second time SoftBank has stepped in to pay Katerra $ 200 million this year alone.
In May, when Kibsgaard, the former director of oil services developer Schlumberger, was brought in to fix the company’s finances, SoftBank poured $ 200 million into the company so that Kibsgaard could right the ship there, according to Journal reports.
Katerra has raised several hundred million dollars from the Japanese tech conglomerate since its launch in 2015. In 2018, when the company closed $ 865 million in funding, Katerra was claiming reservations for $ 1.3 billion in commercial projects. and residential ranging from hotels to student accommodation. That’s a large number, but a fraction of the trillion dollars spent on construction in the month of November 2018 alone, according to data from the US Census Bureau.
Katerra has been hit by delays and cost overruns on some projects, while the COVID-19 pandemic has delayed others. And the irregularities the company discovered in accounting practices also added to the headaches, according to the Journal.
Despite her missteps, Katerra is on track to make money this year, with earnings of between $ 1.5 billion and $ 2 billion, according to details Kibsgaard gave to the Journal.