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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 non-public fairness funds have no less than $896mn in publicity to Northvolt, making the US financial institution its second-largest shareholder. They’ll write that all the way down to zero on the finish of the 12 months, in keeping with letters to traders 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 advised traders that its funding in Northvolt was value 4.29 instances what it had paid for it, and that this might enhance to 6 instances by subsequent 12 months.
Goldman mentioned in an announcement: “Whereas we’re one among many traders upset by this consequence, this was a minority funding by 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 gasoline future growth.
The funding spherical was hailed by Northvolt chief govt Peter Carlsson as “an awesome 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, corporations and traders not to get cold feet on the inexperienced transition.
By Thursday the lossmaking Swedish group, which was Europe’s best-funded non-public start-up after elevating $15bn from traders 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 by numerous funds, wrote to its traders explaining that it might mark all the way 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 intensive 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 non-public fairness enterprise was established in 1986 and sits inside Goldman Sachs Asset Administration, which has over $3tn in belongings underneath supervision, together with over $500bn in various investments corresponding to non-public fairness.
Two buyout funds West Avenue Capital Companions VII and West Avenue Capital Companions VIII have $407mn and $346mn invested in Northvolt, respectively. Horizon Atmosphere and Local weather Options 1, a progress fairness technique touted as Goldman’s first direct non-public 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 non-public 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 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 comparable losses. It’s listed as Northvolt’s second-largest creditor within the Chapter 11 submitting as a result of a $355mn convertible notice.
Some traders have privately complained that Goldman and different funds pushed them onerous to again Northvolt. They’ve additionally mentioned that this, mixed with Northvolt’s chapter, may have an effect on traders’ want to help the inexperienced transition.
Northvolt has mentioned it wants $1-1.2bn additional financing to exit Chapter 11 within the first quarter of subsequent 12 months, and is speaking to varied traders and firms about partnerships. By submitting for Chapter 11 it could 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 growth plans to construct extra services in Germany and Canada which had been backed by intensive subsidies from every nation’s authorities.
