Financial difficulties: Northvolt applies for protection from creditors

The financially troubled Swedish battery manufacturer Northvolt has filed for bankruptcy protection in the USA. The company announced in the evening that it filed for restructuring proceedings in accordance with Chapter 11 of US bankruptcy law. In doing so, Northvolt wants to protect itself from creditors’ claims while it struggles for its future as an independent company.

The step provides access to new sources of financing, Northvolt said. $100 million would be provided to the company by a customer company as part of a type of bridge financing. In addition, Northvolt will receive access to around $145 million (so-called cash collateral) from lenders.

Northvolt has long been considered a great hope for the European automotive industry when it comes to battery production for electric cars. The manufacturer’s largest shareholder is the German carmaker Volkswagen. The owners also include the US investment bank Goldman Sachs and BMW.

Impact on German project?

It is not yet clear what this will specifically mean for the construction of a Northvolt gigafactory in Heide, Schleswig-Holstein. The company explained in the evening: The German subsidiary will be financed independently of the parent company. “It is not part of the Chapter 11 proceedings.”

Germany boss Christofer Haux said, “Construction work in Dithmarschen is currently making further progress. The location has the highest priority.” But it is already clear that the factory will start operations later than initially planned. Cell assembly should not start until the second half of 2027 instead of the end of 2026.

At the beginning of the year, the EU Commission approved funding and guarantees worth 902 million euros for the billion-dollar project in Heide. The federal government and the state of Schleswig-Holstein are supporting the construction of the battery factory with around 700 million euros. There are also possible guarantees for a further 202 million euros.

An administrative agreement stipulates that state funds of 137 million euros should initially flow. But that hasn’t been the case so far. The federal government accounts for around 564 million.

Northvolt initially does not want to access any funds

The battery manufacturer pointed out that the construction in northern Germany was on schedule set together with the federal and state governments. “No funding has been used so far, and Northvolt Germany will not be accessing any funds as long as the restructuring of the parent company continues.”

Schleswig-Holstein’s head of the state chancellery, Dirk Schrödter (CDU), sees opportunities for a restructuring plan together with the creditors. It is unfortunate that no secured financing has yet been secured for the parent company in Sweden, said Schrödter. “It is good that after the discussions of the last few weeks there is now clarity about the further procedure and the next steps.”

“It is good that the construction work in Heide is continuing and concrete statements have now been made about the schedule,” said Schrödter. The state will examine all funding law issues together with the federal government. “Questions regarding possible risks for the federal government and the state are currently being discussed and evaluated in detail with the federal government. Therefore, no statement can be made at the moment about the risk position of the federal government and the state with regard to the convertible bond, as the Chapter 11 procedure is only just beginning.” , explained Schröder.

“The European battery cell industry as a whole is in a challenging situation,” said Haux. The company wants to do justice to this with a strategic realignment. “We have implemented numerous efficiency measures since the summer that are already having an impact.” The step that has now been taken improves the financial situation and raises new capital.

This means “Chapter 11”

Under Chapter 11, companies are initially allowed to continue operating under the supervision of a bankruptcy judge and develop plans for debt repayment. Creditors cannot access the assets during this time.

Northvolt has been struggling with major financing problems for some time. Among other things, car manufacturer BMW withdrew an order for battery cells worth two billion euros in June.

In September, Northvolt announced that it would lay off an estimated 1,600 employees in Sweden and put several expansion plans on hold. The company now wants to concentrate primarily on large-scale production of battery cells at the Northvolt Ett factory in Skellefteå, Sweden.