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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 not 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 yr, based on letters to traders seen by the Monetary Instances.
The losses mark a pointy distinction to a bullish prediction simply seven months in the past by one of many Goldman funds, which informed traders that its funding in Northvolt was value 4.29 occasions what it had paid for it, and that this is able to enhance to 6 occasions by subsequent yr.
Goldman stated in a press release: “Whereas we’re certainly one of many traders upset by this consequence, 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 traders together with German carmaker Volkswagen, it led a $1bn Series B funding round that enabled Northvolt to construct its first manufacturing facility in northern Sweden, and gas future enlargement.
The funding spherical was hailed by Northvolt chief government Peter Carlsson as “an incredible 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 large battery hope filed for Chapter 11 chapter within the US on Thursday and Carlsson resigned the next day, warning European politicians, firms and traders 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 traders and governments, had simply $30mn in money — sufficient for per week’s operations — and $5.8bn in debt.
That day Goldman, which owns a 19 per cent stake in Northvolt via varied funds, wrote to its traders 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, stated 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 assist a revised marketing strategy.
However “regardless of our intensive efforts as a minority shareholder to deliver Northvolt’s varied shareholders collectively, a complete resolution was not discovered”, it stated 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 below supervision, together with over $500bn in various investments resembling personal fairness.
Two buyout funds West Avenue Capital Companions VII and West Avenue Capital Companions VIII have $407mn and $346mn invested in Northvolt, respectively. Horizon Surroundings and Local weather Options 1, a progress 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 referred to as StoneBridge 2020 invested $27mn.
Goldman’s so-called 1869 fund, a car 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 Avenue Capital Companions VIII, traders stated.
Goldman Sachs’ funding banking enterprise can be a big creditor of Northvolt; the battery firm owes it $4.78mn, based on its Chapter 11 submitting.
Volkswagen is Northvolt’s largest shareholder with a 21 per cent stake and is more likely to be nursing comparable losses. It’s listed as Northvolt’s second-largest creditor within the Chapter 11 submitting on account of a $355mn convertible notice.
Some traders have privately complained that Goldman and different funds pushed them onerous to again Northvolt. They’ve additionally stated that this, mixed with Northvolt’s chapter, may have an effect on traders’ need to assist the inexperienced transition.
Northvolt has stated it wants $1-1.2bn additional financing to exit Chapter 11 within the first quarter of subsequent yr, and is speaking to varied traders and corporations about partnerships. By submitting for Chapter 11 it may possibly entry finance together with $145mn in money and $100mn from Swedish truckmaker Scania.
The Swedish group struggled to broaden manufacturing in its sole manufacturing facility in Skellefteå in northern Sweden. Executives conceded it ought to have scaled again earlier enlargement plans to construct extra services in Germany and Canada which had been backed by intensive subsidies from every nation’s authorities.
