(Bloomberg) -- Northvolt AB filed for bankruptcy protection in the US after a desperate bid to secure rescue funding fell short, leaving the struggling battery maker with just one week’s cash in its accounts.
The Swedish electric vehicle supplier will seek to restructure under Chapter 11 of the bankruptcy code, it said in a statement on Thursday. Northvolt had about $30 million in available cash, it said in a filing, and $5.84 billion in debt.
That figure makes it one of the most indebted companies to file for bankruptcy in the US this year, according to data compiled by Bloomberg. It’s followed closely by Intrum AB, another Swedish company that logged a similar petition last week.
Northvolt decided to take the US legal route to provide a well-known framework for existing investors and third parties that have shown interest in providing financing, a person familiar with the matter said.
The move caps months of talks with owners, customers and creditors to find a way for the privately-held maker of batteries to move forward after funds ran short. Northvolt slashed a quarter of its workforce and nixed expansion plans in a bid to overcome a cash squeeze that intensified over the autumn, after it lost a key contract and was unable to draw down a $5 billion green loan.
The company was seen as a standard bearer for European hopes to stand up an independent supply chain for EVs, countering the dominance of well-established Chinese and South Korean manufacturers.
Northvolt Ett, the flagship factory near the Arctic Circle in Sweden, will operate as usual during the reorganization. “The company will continue to make deliveries to customers, while fulfilling obligations to critical vendors and payment of wages to employees,” it said.
Through the court process, Northvolt will have access to about $145 million in cash collateral, the company said. Scania CV AB, the truck-making unit of Volkswagen AG and a key Northvolt customer, told Bloomberg separately that it will provide $100 million in debtor-in-possession financing.
US Bankruptcy Judge Alfredo Perez said during a Thursday hearing that he would approve Northvolt’s request to start tapping its bankruptcy financing and other borrowings to cover employee wages and expenses during Chapter 11. After the announced job cuts, Northvolt still has roughly 6,400 employees across Sweden, Poland and the US.
Northvolt subsidiaries responsible for planned factories in Germany and Canada remain outside of the Chapter 11 process, though the company said those projects will be postponed.
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In recent weeks, Northvolt held intense negotiations involving lenders, shareholders and customers over a more than $300 million rescue proposal meant to tide the company over as it sought longer-term funding. When no deal materialized, the battery maker was left to seek protection from creditors.
The company’s court filings showed how reliant Northvolt had become on key customers. Its debts include a $330 million convertible instrument from Volkswagen, its biggest shareholder, that’s due in December 2025. The group lost $1.2 billion in in 2023, which it attributed to Asian manufacturers driving down prices.
Its hopes are now pinned to one overarching objective, it said: “To partner with one or more long-term strategic or financial investors,” according to Scott Millar, a senior managing director at Teneo, Northvolt’s financial adviser.
Some Northvolt investors had been willing to go along with the rescue plan. Sweden’s 4 to 1 Investments said in a statement that it was prepared to provide additional capital, but “there was not support from a sufficiently broad group of the company’s key stakeholders.”
The state-owned pension funds had invested a total of about 5.8 billion kronor ($520 million) in Northvolt shares and convertible debt.
Northvolt opened its main plant in Skelleftea, near the Arctic Circle, in 2021, but was unable to meet targets for ramping up volumes. Meanwhile, its EV end market weakened, while stronger competitors drove down battery prices. In June, shareholder BMW AG canceled a $2 billion battery order over quality issues.
The company soon launched a review of its sprawling growth plan. It decided to slash 20% of its global work force, replaced the CEO of the flagship plant and bankrupted a unit dedicated to expansion in Skelleftea.
Volvo Car AB initiated proceedings last month to take over their joint venture in Sweden, while the representative from Volkswagen stepped down in November.
Sweden’s government, which for weeks rebuffed any suggestions of providing cash aid to Northvolt, “continues to support a viable battery industry and the green transition,” Deputy Prime Minister Ebba Busch said in a post on X, adding that she “hopes that the Chapter 11 process allows for a possibility to find a long-term solution” for Northvolt.
The German government said it stands by its support for Northvolt and the project in Heide, and will keep up a dialog with the company, the Swedish government and other key players.
Northvolt took in some $10 billion in debt and equity financing since its founding, including support from the European Investment Bank, Sweden’s Export Credit Corporation and the Nordic Investment Bank. Northvolt Chief Executive Officer Peter Carlsson said this month that the company needed more than $900 million to permanently secure its finances, and that the group was looking for partnerships, including in Asia.
“We strongly believe in Northvolt’s ability to navigate through this period,” founding shareholder Vargas Holding AB said in a statement. “A Chapter 11 reorganization will provide stability to turn around this challenging situation.”
Northvolt is being advised by Teneo as its restructuring and communications advisor. Kirkland & Ellis LLP, A&O Shearman and Mannheimer Swartling Advokatbyra AB are serving as legal counsel. The company has also engaged Rothschild & Co to run its marketing process.
The case is Northvolt AB, 24-90577, US Bankruptcy Court, Southern District of Texas.
--With assistance from Jonathan Randles.
(Adds details in third paragraph.)
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