Export credit agencies (ECAs) from France, Germany and Japan have US$668mn of exposure to Swedish battery maker Northvolt, which filed for bankruptcy protection in the US last week.

The debt is part of a US$1.74bn facility signed in 2020 with major banks, including BNP Paribas, ING, SMBC, UniCredit, the European Investment Bank and the Export-Import Bank of Korea (Kexim).

During a bankruptcy hearing in Houston on November 21, the lenders agreed to release US$110mn from a repayment reserve account to fund Northvolt’s immediate operating expenses. In return, the lenders took collateral in the form of assets from another Northvolt subsidiary.

Founded as a champion of battery production in Europe, Northvolt has been battered by slackening orders for its batteries as demand for electric vehicles slows. The company also hit operational hurdles that delayed deliveries to customers.

Before the funding lifeline, the company had just US$30mn in cash on hand, enough to fund one week of operations, it said in a Chapter 11 bankruptcy filing. Chapter 11 provides companies with protection from creditors while they attempt to restructure debts. Scania, the truck maker and major Northvolt customer, also agreed to provide an additional US$100mn in financing.

The Stockholm-headquartered company, established in 2015 by two ex-Tesla executives, previously attracted large sums of finance backed by ECAs in Europe and Asia.

Northvolt closed what was described as Europe’s largest ever green loan in January this year for US$5bn, backed by Euler Hermes, Nexi and K-Sure, South Korea’s ECA. But the company says disbursements were never made because its expansion plans “were ultimately abandoned”.

That deal was also designed to refinance the 2020 loan, very little of which has so far been repaid, according to a court filing by Teneo, Northvolt’s restructuring advisor.

Germany’s ECA Euler Hermes covered a portion of the facility with outstanding principal of US$470mn, according to the bankruptcy filing. Japan’s Nippon Export and Investment Insurance (Nexi) and Bpifrance have covered loans with US$131mn and US$67mn of principal respectively.

Kexim, a government-owned bank, also provided a term loan with US$87mn outstanding while the European Investment Bank has an exposure of US$313mn.

Commercial lenders also provided US$602mn in uncovered commercial facilities.

A Euler Hermes spokesperson says: “We cannot currently make any statements about the federal government’s risk position with regard to the convertible bond, as the Chapter 11 proceedings are only just beginning.” The agency is “closely monitoring” the situation and is contact with the Swedish government and Northvolt, the spokesperson adds. 

Bpifrance did not respond to a request for comment from GTR, while Nexi declined to comment.

ING and SMBC, which are the facility and intercreditor agents on most of the loans that comprise the facility, declined to comment.

An EIB spokesperson says the bank “is closely monitoring the situation”.

“Together with partners from the public and private sectors supporting the company, we are determined to reach a constructive resolution that will safeguard the EIB’s and the EU’s interests,” the spokesperson adds, noting the exposure is guaranteed by the European Fund for Strategic Investments.

Lawyers for the first lien lenders, which are primarily the ECA-covered facilities, and the second lien lenders, mainly the uncovered loans, both told the court they supported releasing the collateral as cash.

“We’re on course today,” said Alice Eaton, a partner at law firm Paul Weiss, presenting the second lien lenders. “There may be issues in the future, we hope we can consensually resolve all of them. We look forward to the company continuing its restructuring efforts and seeking to raise incremental capital so we can have those discussions in an orderly fashion.”

A lawyer for Northvolt thanked the banks for their support, telling the judge: “Our lenders really stepped up… this was really an amazing joint effort.”

The company also indicated it would make further bankruptcy filings in other jurisdictions, such as Sweden.

Northvolt’s investors, however, have been forced to substantially write down their exposures to the company, which currently has a workforce of around 6,500 after slashing a quarter of its staff this year.

Goldman Sachs entirely wrote off its US$900mn investment in Northvolt last week, the Financial Times reported. Volkswagen, a key backer and customer, has significantly written down the value of its 21% stake in the company, which was valued at almost €700mn a year ago, according to a Reuters report.

Northvolt said in a statement that it anticipates completing the restructuring process in the first quarter of 2025, and will “evaluate proposals for new money investment”.

“This decisive step will allow Northvolt to continue its mission to establish a homegrown, European industrial base for battery production,” the company said in a November 21 statement announcing it was seeking bankruptcy protection.

“Despite near-term challenges, this action to strengthen our capital structure will allow us to capture the continued market demand for vehicle electrification. We are likewise pleased by the strong support we have received from our existing lenders and our customers.”

The company later said that co-founder Peter Carlsson will step down as CEO but remain a senior advisor and board member.

Most of Northvolt’s current production is in Sweden, but it is also has currently operating or planned facilities in Canada, Germany and Poland.

Northvolt did not respond to questions about its ECA-backed financing.

This story has been updated to include comment from Euler Hermes.