Swedish gigafactory Northvolt filed for Chapter 11 bankruptcy protection in the US yesterday, culminating months of speculation over its financial health.
The procedure means Northvolt gains access to $245m in capital — $145m in cash, and $100m in new financing from Swedish truckmaker Scania, a large Northvolt customer. That will be enough to keep operations running until early next year, the company said in a press release.
When it filed for Chapter 11 in Texas on Thursday, the company had about $30m available in cash, and $5.84bn in debt — making it one of the most indebted companies to file for bankruptcy in America this year, according to data compiled by Bloomberg.
What happens to Northvolt next?
Chapter 11 is a court-supervised process under US bankruptcy law designed to help struggling companies restructure their debt and operations. It temporarily prevents creditors from taking action against a company and gives it four months to come up with a restructuring plan.
Speaking to reporters at a press conference on Friday, outgoing Northvolt CEO Peter Carlsson — who resigned this morning — said the filing would allow Northvolt to enter discussions with existing shareholders and new, external financiers. He said the focus of the company won’t change, but that it may bring in partners for recycling and cathode production, two things it had aimed to do in-house.
Carlsson said Chapter 11 will also allow the company to pay contractors, and Northvolt confirmed it has filed motions to allow it to pay employees and critical contractors. The Chapter 11 process allows companies to sell assets to make such payments.
During a restructuring, ownership of a company can fundamentally change if new investors step in to save the business — a possibility that Northvolt flagged to Swedish media Di.
With Carlsson gone, the Chapter 11 restructuring will be led by CFO Pia Aaltonen-Forsell and former president of cells Matthias Arleth, who has become COO. They’ll be supported by chief restructuring officer, Scott Millar.
Why did Northvolt file for bankruptcy in the US?
The bar for filing for Chapter 11 in the US is significantly lower than the same bankruptcy procedure in Northvolt’s native Sweden. To enter the equivalent process in Sweden, Northvolt would have to prove it’s fundamentally viable as a business — something it may struggle to do at present.
Chapter 11 is an expensive form of restructuring. The benefit is that, as opposed to other bankruptcy processes, it allows a company’s management to maintain control of the business during the restructuring. In other bankruptcy processes, that role is taken on by an external trustee.
Under Chapter 11, a company is not allowed to make certain decisions without the permission of the courts, including the sale of some assets.
Several Swedish companies have opted to file for Chapter 11 bankruptcy in the US in recent years, including airline SAS. Other companies such as General Motors and United Airlines have historically used Chapter 11 to restructure their debts and continue doing business.
What if Chapter 11 doesn’t work?
If Northvolt fails to come up with a restructuring plan in the next four months, the court has the power to extend the process to up to 18 months, if there’s a viable reason. If the process fails, the next step is to file for Chapter 7, meaning the company is liquidated and its assets sold off by a trustee.
Read the orginal article: https://sifted.eu/articles/northvolt-bankruptcy-chapter-11-bankruptcy-latest/
