Katerra Inc.

DEBTORS AND THEIR BUSINESSES

The Debtors include the following companies that provide single and multi-family home design, architecture, and efficient building services:

• Katerra Inc.
• Katerra Inc. (Cayman)
• AlgoSquare Inc.
• Apollo Technologies, Inc.
• Bristlecone 28th Ave, LLC
• Bristlecone Residential, LLC
• CAPGro Construction Management, LLC
• Construction Assurance Ltd.
• Dangoo Electronics (USA) Co., Ltd.
• Edge @ LoHi, LLC
• Hillsboro 1 Project MM LLC
• Hillsboro 1 Project LLC
• Hillsboro 2 Project MM LLC
• Hillsboro 2 Project LLC
• Katerra Affordable Housing LLC
• Katerra Architecture LLC
• Katerra Construction LLC
• Katerra Engineering LLC
• Katerra Pearson Ranch Investment LLC
• Katerra Pegasus RiNo Investment LLC
• Katerra RO2 Knipe Village Investment LLC
• Katerra XSC Houston Investment LLC
• Kirkland 1 Project MM LLC
• Kirkland 1 Project LLC
• Kirkland 2 Project MM LLC
• Kirkland 2 Project LLC
• Lord, Aeck & Sargent, Inc.
• Perimeter Building Services LLC
• Roots Software, LLC
• Skyview Concrete LLC
• UEB Builders, Inc.
• Valpico Glenbriar Apartments LLC
• WM Aviation, LLC

DEBTORS HAVE A “UNIQUE” DEBT SITUATION

At the first hearing in the case, held on June 7, 2021, the Debtors’ attorneys repeatedly asserted that this bankruptcy case is “unique.” While perhaps an overused descriptor, it is accurate when discussing Katerra’s bankruptcy. Due to an attempt to stave off bankruptcy, which resulted in an out-of-court restructuring transaction in late December 2020, Katerra was able to file for bankruptcy with no secured debt. All of Katerra’s prior secured debt was converted to equity by virtue of the December 2020 restructuring.

Despite its lack of secured debt, Katerra reports that it is in dire straights. Due to a series of events, including the COVID-19 pandemic, unprofitable contracts, and unexpected cost overruns, Katerra’s liquidity is nearly zero. Therefore, it is unable to pay its ongoing debts as they come due. Katerra went to its prior lenders asking for additional credit, but they were unable or unwilling to provide it. So, Katerra filed for bankruptcy.

At the first day hearing, the Court granted several forms of typical relief given to Debtors who file for Chapter 11 bankruptcy. Among the things that the Debtors are able to do are pay certain claims of “critical vendors,” borrow money to finance the bankruptcy case, and pay certain critical bills, including those for payroll, utilities, and insurance. The relief granted by the Court will allow the Debtors to continue operating while they try to sell their assets.

ASSETS AND BUSINESSES ARE UP FOR SALE

The Debtors plan to sell their assets, including their valuable proprietary home-building system “K3,” which they claim is a cost-effective and environmentally friendly home building platform. They also intend to sell some of their subsidiaries. When the sales are all complete, the Debtors have stated that they hope to provide “some” return to their creditors.

At this time, the Debtors have yet to provide detailed financial information, including the magnitude of their debts. They have received an extension and now have until August 4th to provide those details. In their Petitions, which is the primary paper a debtor must file to commence a bankruptcy case, the Debtors indicated that their assets are worth between $500 million and $1 billion and that their liabilities total between $1 billion and $10 billion. They estimate that they have between 10,001 and 25,000 creditors.

Considering the deficit of public information, it is impossible to predict how much creditors might be repaid in this case. It is likely that the payout will largely depend on how successful the Debtors’ marketing and sale process are. Yet, the case will need to proceed quickly or the Debtors will run out of money and be forced into a liquidation.

If you are a creditor of any of the Debtors, you will need to act fast to make your voice heard and potentially impact your chance at a higher repayment. If you have questions, please do not hesitate to reach out to PRLT.