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Funds managed by Goldman Sachs will write off virtually $900mn after Swedish battery maker Northvolt filed for Chapter 11 bankruptcy this week.
Goldman’s personal fairness funds have no less than $896mn in publicity to Northvolt, making the US financial institution its second-largest shareholder. They may write that right down to zero on the finish of the 12 months, in keeping with letters to buyers seen by the Monetary Occasions.
The losses mark a pointy distinction to a bullish prediction simply seven months in the past by one of many Goldman funds, which informed buyers that its funding in Northvolt was value 4.29 occasions what it had paid for it, and that this could enhance to 6 occasions by subsequent 12 months.
Goldman mentioned in an announcement: “Whereas we’re one in every of many buyers dissatisfied by this end result, this was a minority funding via extremely diversified funds. Our portfolios have focus limits to mitigate dangers.”
Goldman first invested in Northvolt in 2019 when, together with different buyers together with German carmaker Volkswagen, it led a $1bn Series B funding round that enabled Northvolt to construct its first manufacturing unit in northern Sweden, and gasoline future growth.
The funding spherical was hailed by Northvolt chief govt Peter Carlsson as “an excellent milestone for Northvolt” — then a four-year previous start-up — and “a key second for Europe” in its push to counter Asian dominance of battery making.
However Europe’s one-time massive battery hope filed for Chapter 11 chapter within the US on Thursday and Carlsson resigned the next day, warning European politicians, firms and buyers not to get cold feet on the inexperienced transition.
By Thursday the lossmaking Swedish group, which was Europe’s best-funded personal start-up after elevating $15bn from buyers and governments, had simply $30mn in money — sufficient for every week’s operations — and $5.8bn in debt.
That day Goldman, which owns a 19 per cent stake in Northvolt via numerous funds, wrote to its buyers explaining that it will mark right down to zero its investments.
The financial institution, which had taken half in a number of subsequent funding rounds over the previous 5 years, mentioned that during the last a number of months it had been working with Northvolt’s prospects, lenders and shareholders to safe short-term bridge financing to shore up the battery maker’s monetary place, restructure its capital stack and lift longer-term financing to help a revised marketing strategy.
However “regardless of our in depth efforts as a minority shareholder to convey Northvolt’s numerous shareholders collectively, a complete resolution was not discovered”, it mentioned within the letters to shareholders.
Goldman’s personal fairness enterprise was established in 1986 and sits inside Goldman Sachs Asset Administration, which has over $3tn in belongings beneath supervision, together with over $500bn in different investments resembling personal fairness.
Two buyout funds West Road Capital Companions VII and West Road Capital Companions VIII have $407mn and $346mn invested in Northvolt, respectively. Horizon Setting and Local weather Options 1, a development fairness technique touted as Goldman’s first direct personal markets technique devoted to investing in local weather and environmental options, has $116mn invested in Northvolt; and a fund known as StoneBridge 2020 invested $27mn.
Goldman’s so-called 1869 fund, a automobile that offers its community of former companions entry to a number of personal funds managed by the fund’s asset administration division, additionally had a small quantity of publicity to Northvolt, as a result of the fund has dedicated 25 per cent of its capital commitments to West Road Capital Companions VIII, buyers mentioned.
Goldman Sachs’ funding banking enterprise can also be a big creditor of Northvolt; the battery firm owes it $4.78mn, in keeping with its Chapter 11 submitting.
Volkswagen is Northvolt’s largest shareholder with a 21 per cent stake and is more likely to be nursing related losses. It’s listed as Northvolt’s second-largest creditor within the Chapter 11 submitting as a consequence of a $355mn convertible observe.
Some buyers have privately complained that Goldman and different funds pushed them laborious to again Northvolt. They’ve additionally mentioned that this, mixed with Northvolt’s chapter, might have an effect on buyers’ want to help the inexperienced transition.
Northvolt has mentioned it wants $1-1.2bn further financing to exit Chapter 11 within the first quarter of subsequent 12 months, and is speaking to varied buyers and firms about partnerships. By submitting for Chapter 11 it could entry finance together with $145mn in money and $100mn from Swedish truckmaker Scania.
The Swedish group struggled to increase manufacturing in its sole manufacturing unit in Skellefteå in northern Sweden. Executives conceded it ought to have scaled again earlier growth plans to construct extra amenities in Germany and Canada which have been backed by in depth subsidies from every nation’s authorities.
