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Katerra, Inc. – Selects Mercer International Affiliate as Stalking Horse ($50mn Cash) for Spokane Washington Assets; Auction Set for August 2nd


July 22, 2021 – Further to the Court’s July 6th bidding procedures order [Docket No. 370], the Debtors have filed a notice naming Blue Varsity LLC ("Blue Varsity") as their stalking horse bidder in a proposed sale of their cross-laminated timber facility in Spokane, Washington (the “CLT Facility"), with the notice attaching an executed July 22, 2021 asset purchase agreement (the “Stalking Horse APA”) amongst the Debtors, Blue Varsity and global forest products company Mercer International Inc. ("Mercer," Nasdaq: MERC), as guarantor, that memorializes the terms of the $50.0mn cash sale [Docket No. 662]. Blue Varsity is an affiliate of the guarantor, global forest products company Mercer (Nasdaq: MERC). The APA is signed on behalf of each of Blue Varisty and Mercer by Mercer President and CEO David Gandossi. 

Seattle, Washington-based Mercer, which describes itself as "a global forest products company with operations in Germany and Canada with consolidated annual production capacity of 2.2 million tonnes of pulp and 550 million board feet of lumber" had $1.423bn of revenue in 2020.

An auction is scheduled to begin on August 2nd with a sale hearing to follow on August 5th.

The Debtors describe the CLT Facility as follows: "Katerra’s state-of-the-art CLT manufacturing facility in Spokane Valley, Washington is equipped with extensive automation technologies, as well as one of the largest CLT presses currently in operation globally. The 270,000 sq. ft. facility is the largest single-use CLT facility in North America, producing 30% of the current North American mass timber manufacturing capacity – two times any comparable manufacturer."

Key Terms of the Stalking Horse APA:

  • Seller: Katerra, Inc.
  • Purchaser: Blue Varsity LLC
  • Purchase Price: The aggregate consideration (collectively, the “Purchase Price”) to be paid by Purchaser for the purchase of the Acquired Assets shall be: (i) the assumption of the Assumed Liabilities and (ii) a cash payment of $50.0mn minus the Real and Personal Property Tax Adjustment (the “Cash Payment”).
  • Bidder Protections: (a) a Breakup Fee equal to 3% of the Purchase Price, and (b) an Expense Reimbursement provision for reasonable, actual, and documented out-of-pocket fees and expenses of the Stalking Horse Bidder of up to 1% of the Purchase Price.


On July 6th, the Court hearing the Katerra cases issued an order (i) approving bidding procedure for sale of substantially all of the Debtors’ assets, (ii) authorizing the Debtors to enter into one or more stalking horse arrangements, including the provision of bidder protections (capped at 3% and subject to Court approval), and (iii) approving a proposed auction/sale timetable culminating in an auction on August 2, 2021 and a sale hearing on August 5, 2021 [Docket No. 370].

The Debtors have separately filed motions requesting authority for private sales of their "Renovation Business" and "Lord Aeck Sargent" architecture business lines (Docket Nos. 176 and 187, respectively) with a hearing on those private sales scheduled for July 8th.

Although the Debtors noted in their June 7th bidding procedures motion [Docket No. 30] that they "are currently advancing discussions with…several potential bidders about certain of the Debtors’ business and assets", there is no designated stalking horse with "advancing discussions" clearly falling short of "advanced discussions."

The motion states, “…[t]he Debtors filed these chapter 11 cases to effectuate a marketing process for their assets aimed at maximizing the value of their estates. To that end, the Debtors and their advisors, with the support of the DIP Lender, determined in their business judgment, that exploring a marketing process for potential sales of some or all of the Debtors’ assets was in the best interests of the Debtors’ estates.

Prior to the Petition Date, the Debtors engaged Houlihan Lokey Capital, Inc. (‘Houlihan Lokey’) as their investment banker in connection with the Debtors’ contingency planning efforts. Houlihan Lokey is spearheading a marketing process designed to identify potential bidders and purchasers for some or substantially all of the Debtors’ assets or the Debtors’ business. Specifically, prior to the date hereof, Houlihan Lokey contacted several potential bidders about certain of the Debtors’ business and assets. The Debtors and their advisors are currently advancing discussions with these parties in an effort to identify the highest or otherwise best bidders amongst them and to improve their bids to the benefit of the Debtors’ estates. As of the date of this Motion, that process remains ongoing.

The marketing process and the Bidding Procedures proposed herein will enable the Debtors and their advisors to move expeditiously to complete a fulsome marketing process, receive, evaluate, and improve upon bids, execute one or more Stalking Horse Agreements (as defined below) if doing so will maximize the value received for their assets, and hold an auction (if necessary) to determine the highest or otherwise best bid (or bids). The Debtors intend to use the proceeds of any asset sale to repay the proposed DIP Facility and fund distributions under a plan

Maximizing the value of the Debtors’ estates for the benefit of their stakeholders depends, in large part, on the Debtors expeditiously proceeding through these chapter 11 cases and minimizing cash burn. Under the circumstances, the Debtors believe that the marketing process will result in value-maximizing transactions for the benefit of their estates. The Debtors request that the Court grant the relief requested herein.”

Key Dates:

  • Deadline to Designate Stalking Horse Bidders (if any): July 22, 2021
  • Bid Deadlines: July 29, 2021
  • Auction (if applicable): August 2, 2021
  • Sale Objection Deadline: August 4, 2021
  • Sale Hearing: August 5, 2021
  • Outside Closing Date: August 15, 2021

About the Debtors

Petition date filings note: "Katerra is a technology-driven construction company that develops, manufactures, and markets products and services in the commercial and residential construction spaces. Katerra delivers a comprehensive suite of products and services for its clients through a distinct model that combines end-to-end integration with significant investment in technological and design innovation. Katerra offers services to its clients through three distinct offerings: (a) end-to-end new build; (b) construction services; and (c) renovations. Katerra has approximately 6,400 employees who are primarily located in nine countries. In the year ending 2020, Katerra’s operations generated revenue of approximately $1.75 billion.

According to the Debtors: “Katerra is on a mission to transform construction through innovation of process and technology. As a new breed of company within industry, Katerra is powered through vertical integration and technology investment to provide a range of services and products to clients across the construction value chain. Founded in 2015, Katerra's demonstrated progress includes advanced manufacturing facilities, design and construction services, a large number of completed projects, and a growing product portfolio that includes whole-building platforms and sustainable mass timber.

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The post Katerra, Inc. – Selects Mercer International Affiliate as Stalking Horse ($50mn Cash) for Spokane Washington Assets; Auction Set for August 2nd appeared first on Daily Bankrupt Company Updates | Bankrupt Company News.

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