The automotive aftermarket sector has faced significant economic distress in the last year, with several auto parts retailers and manufacturers filing for bankruptcy protection to reorganize their businesses.
In certain cases, the reorganizations can mean survival for the auto parts business, but sometimes the bankruptcy process fails, and a company may need to liquidate.
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Wheel Pros, which operates as auto parts distributor and retailer Hoonigan, sought survival as it filed for a prepackaged Chapter 11 bankruptcy on Sept. 9, 2024, to eliminate $1.2 billion in debt and provide about $570 million in new capital through an exit facility.
Related: Auto parts chain shares good news after closing 700 stores
Under the consensual restructuring, Wheel Pros handed 85% of its new equity interests to holders of first-lien claims and the remaining 15% to new first-lien lenders who backstopped the debtor’s exit term loan.
Accuride Corp., another leading manufacturer of wheels and wheel end products for commercial trucks and trailers, followed in Wheel Pros’ tracks and filed for Chapter 11 bankruptcy protection on Oct. 9, 2024, also seeking a consensual restructuring of its debt to continue operating as a going concern.
Northvolt, which makes electric car batteries for BMW vehicles, will liquidate its assets. (Photo by Emanuele Cremaschi/Getty Images)
Emanuele Cremaschi/Getty Images
Northvolt cancels Chapter 11, liquidates
And now, Northvolt AB, which makes electric vehicle batteries for several carmakers, including BMW, Audi, Porsche, Volvo, Polestar, and Swedish truckmaker Scania, has obtained a bankruptcy court order to dismiss its Chapter 11 case after it filed for bankruptcy liquidation in Sweden a few weeks ago, Electrive reported.
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The Stockholm-based debtor had filed for Chapter 11 bankruptcy protection on Nov. 21, 2024, seeking a going-concern recapitalization or sale of its assets as it faced an acute liquidity crisis.
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Since it filed for bankruptcy protection, the company’s restructuring and reorganization plans failed and there was reportedly little hope for the battery manufacturer to recover.
The company decided its best option was to dismiss the U.S. bankruptcy proceedings and file for bankruptcy in Sweden, which is similar to Chapter 7 liquidation in the U.S. The company also believed it was best to keep the bankruptcy proceedings in Sweden, since that’s where the investors’ assets were located.
The company also revealed that about 1,700 employees in Sweden would be terminated.
Northvolt will continue operating
The company’s Swedish bankruptcy trustee earlier this week revealed that an agreement had been reached with shareholders to allow the company to continue operating in Sweden under scaled-down conditions. The company, however, would need to reduce staff by about 3,000 workers under the conditions.
Northvolt arranged significant investments from Volkswagen and Goldman Sachs and had over $5.8 billion in total funded debt on its books when it filed Chapter 11 bankruptcy, including over $3.9 billion in bridge loan and convertible debt instruments and $1.9 billion in first-and second-lien debt, according to a declaration from Chief Restructuring Officer Scott Millar.
The debtor listed $1 billion to $10 billion in assets and liabilities in its petition. Its leading unsecured creditors include Volta, owed $3.85 billion; KFW, owed about $696 million; Volkswagen, owed over $355 million; and Nordic Trustee and Agency, owed $154 million.
The company was founded in Sweden in 2016 as SGF Energy by two former Tesla employees, Peter Carlsson and Paolo Cerruti. It later changed its name to Northvolt in 2017 and planned to expand operations across the globe to several countries, including Sweden, Poland, Norway, Germany, Canada, and Portugal.
It also acquired U.S.-based battery tech company Cuberg Inc. to establish an advanced technology center in Silicon Valley.
Related: Another iconic restaurant chain files for Chapter 11 bankruptcy
