Northvolt files for Chapter 11 bankruptcy protection in the United States, to help it restructure its debt and improve production
Europe’s battery start-up Northvolt AB has confirmed that after months of financial issues, it has filed for bankruptcy protection in the United States.
The Swedish firm announced on Thursday that it “and certain of its subsidiaries voluntarily filed for Chapter 11 reorganisation in the United States.”
The filing comes as no surprise, after Northvolt last week was said to be discussing the possibility of bankruptcy protection in the United States as one of several options for the cash-strapped company to survive.
Chapter 11 filing
Northvolt said that the filing for Chapter 11 reorganisation in the United States will allow access to approximately $245 million in new financing.
“By enabling the company to restructure its debt, appropriately scale the business to current customer needs and secure a sustainable foundation for continued operation, these Chapter 11 filings will help Northvolt to implement the decisions made as part of its strategic review to rescope the business and prioritise commitments to customers,” it stated.
“Importantly, this process will allow Northvolt to access new sources of funding, including approximately $145 million in cash collateral,” the firm stated. “In addition, one of Northvolt’s existing customers has committed to provide $100 million in new financing to support Northvolt’s business operations in the form of debtor-in-possession (DIP) financing, which is a specialised type of financing for businesses that are restructuring through a Chapter 11 process.”
Northvolt added that operations will continue as usual during Chapter 11 reorganisation process, with company saying it will meet its obligations to customers, vendors and employees.
It noted that the Chapter 11 restructuring process in the US is distinct from a bankruptcy or administration proceeding in Sweden or many other countries.
Decisive step
Northvolt Ett, the company’s flagship battery gigafactory in Skellefteå, Sweden, and Northvolt Labs in Västerås, Sweden “will remain operational as Northvolt ramps up production to meet commitments to its customers.”
Northvolt Germany and Northvolt North America, subsidiaries of Northvolt AB with projects in Germany and Canada, are financed separately and will continue to operate as usual outside of the Chapter 11 process as key parts of Northvolt’s strategic positioning.
“This decisive step will allow Northvolt to continue its mission to establish a homegrown, European industrial base for battery production,” said Tom Johnstone, interim Chairman of the Board. “Despite near-term challenges, this action to strengthen our capital structure will allow us to capture the continued market demand for vehicle electrification. We are likewise pleased by the strong support we have received from our existing lenders and our customers.”
Earlier this week a Northvolt company spokesperson confirmed it had appointed restructuring expert Paul O’Donnell to oversee the lithium-ion battery maker’s main facility in northern Sweden.
As part of the restructuring process, which is anticipated to be completed in the first quarter of 2025, Northvolt said it will evaluate proposals for new money investment. This process will include engagements with both strategic and financial investors, as well as existing lenders, shareholders and customers.
“Throughout this process, we will focus on meeting our commitments to our stakeholders, including our employees, customers, suppliers and the governments of the countries in which we operate,” said Johnstone. “As a reorganised entity, we aim to establish a resilient base of operations and a competitive platform for innovation and long-term growth that will advance our work to build a more sustainable society.”
The Chapter 11 filings have been made in the US Bankruptcy Court for the Southern District of Texas.
Troubled period
Last month Northvolt was reportedly in talks with investors and lenders over securing short-term funding worth about 200 million euros ($218m, £167m).
That funding however was not considered enough to secure the company’s future however, and shortly after that it was reported that the talks with creditors, shareholders and at least one customer on a short-term financing deal had stalled.
That came soon after the company replaced the chief executive of its Northvolt Ett (“One”) factory.
In September after a strategic review and as part of a cost cutting exercise, the firm announced it would cut 25 percent of its workforce.
It confirmed that 1,600 Northvolt employees were to be let go, split across Skellefteå (1,000 positions), Västerås (400 positions) and Stockholm (200 positions).
Money, production issues
According to the Financial Times, Northvolt is filing for Chapter 11 bankruptcy after it failed to agree a last-minute rescue package with investors.
Northvolt is Europe’s best-funded start-up, and in total the lithium-ion battery manufacturer has received approximately 10 billion euros ($10.57 billion) in funding since its startup in 2016.
Some figures suggest it has raised as much as $15 billion from investors such as Volkswagen, Goldman Sachs and BlackRock as well as from the German and Canadian governments.
Northvolt was seen as crucial to Europe’s automotive industry and its best chance of pushing back against Asian battery production and local players such as China’s CATL and BYD; Japan’s Panasonic; and South Korea’s LG and Samsung.
But the company has struggled to increase production at its one factory in Skellefteå in northern Sweden.
Earlier this week Northvolt admitted it does not plan to meet a goal of producing 100,000 cells per week, after Reuters had reported it has been consistently missing internal production targets since early September.
The firm has only been producing 20,000 shippable cells per week.
The delays meant Northvolt lost a 2 billion euro (£1.7bn) contract with BMW in June, since which time it has been primarily producing for truck maker Scania as well as Volkswagen’s Audi and Porsche brands.
Northvolt reportedly said in its Chapter 11 filing that as of Thursday, it had only $30mn of cash left, which is enough to support its operations for one week.
The loss-making company added that it had debt of $5.8bn.
