Ari Natter
Wed, August 9, 2023
(Bloomberg) -- Proterra Inc., the electric bus maker touted by President Joe Biden that filed for bankruptcy this week, was the recipient of millions of dollars in US Covid-relief government aid.
The Burlingame, California-based company was awarded a $10 million loan from the Paycheck Protection Program by the Trump administration in 2020 that was forgiven in May 2022, according to a company filing Wednesday. Proterra reported it as a net gain of $10.2 million after interest payments were refunded by the Small Business Administration, the Securities and Exchange Commission filing said.
The Covid-relief aid came on top of other federal government incentives and support for the electric bus industry more broadly, as well as repeated shout-outs for the company from Biden. Proterra was also widely expected to benefit from new demand for electric buses fostered by last year’s infrastructure and climate laws, including more than $5 billion earmarked for replacing existing buses with zero-emission models and new tax credits for battery and clean-vehicle manufacturing.
The White House and the Small Business Administration didn’t immediately respond to a request for comment. An administration official said policies championed by Biden and other Democrats were responsible for an increase in electric-vehicle demand and pointed to a Cox Automotive study that said EV sales hit a record high last quarter. Some 96% of Paycheck Protection Plan loans were forgiven, according to an October report by the SBA.
The nearly 20-year-old manufacturer of electric buses and batteries was valued at $1.6 billion when it went public in June 2021 and has drawn praise from Biden who went on a virtual tour of a company facility earlier that year amid White House plans to electrify the nation’s fleet of transit and school buses.
In February, Biden appointed Proterra Chief Executive Officer Gareth Joyce to the President’s Export Council. Energy Secretary Jennifer Granholm served on Proterra’s board from 2017 until she became secretary and sold her stock in the company in May 2021, providing her with a net capital gain of $1.6 million following criticism from the GOP.
The company filed for Chapter 11 bankruptcy protection in Delaware Monday, saying in a statement it was facing “market and macroeconomic headwinds.” The company, which said it plans to either recapitalize its businesses or sell them off, has seen its shares plunge 90% since the announcement.
A spokesman for Proterra said the loan “supported our ability to maintain a full workforce as we navigated the uncertainty caused by the Covid-19 pandemic.”
In its SEC filing, Proterra said it expected the billions of dollars in funding for electric buses would “remain an important factor in our company’s growth prospects,” but didn’t note receiving any funding from either the infrastructure or climate laws directly.
--With assistance from Jennifer A. Dlouhy.
What led to EV darling Proterra's bankruptcy
Kirsten Korosec
Wed, August 9, 2023
Image Credits: Proterra
Proterra, a company that develops battery systems for buses and other heavy duty EVs, filed for bankruptcy earlier this week, making it the latest in a string of failures in the EV sector.
While some parallels can be drawn between Proterra and other failing or defunct EV companies, this company faces specific headwinds that took it down a rocky financial path.
The bankruptcy filing came as a surprise for many. After all, Proterra was a company that was well-established — certainly no pre-revenue upstart — and a darling in the EV sector. It launched in 2004 as an electric transit bus company, a sector that seemed open for the taking and well positioned for growth. It raised millions from high-profile backers like Daimler and locked in deals with numerous cities. (As of August 2023, the company had delivered more than 1,000 electric transit buses, including 199 new transit buses and 14 pre-owned buses in 2022.)
In 2015, Proterra diversified its business and decided to develop its own battery technology and powertrains. It eventually became a company with three business lines: battery systems called Powered, the Transit unit and a charging infrastructure business called Energy. Software services rounded out the mix. The company's battery system business unit helped it expand beyond buses and into cargo vans, off-highway equipment that's used in construction and mining, and even Class 8 semi-trucks. It has since installed more than 100 megawatts of heavy-duty EV charging infrastructure to support commercial vehicle fleets across North America.
Things were going well enough that it went public in 2021 via a merger with special purpose acquisition company, in a deal was valued at $1.6 billion.
So, how did Proterra wind up filing for Chapter 11 bankruptcy protection?
A tightening capital market didn't help. Proterra burned through capital as it tried to scale its three businesses simultaneously.
And then there are the special problems associated with companies that try to make a profit through sales to cities, and specifically transit agencies.
Deals with transit agencies, which rely on federal and state funding, are slow to finalize and budgets are tight, which can mean reducing the price of a product to win a bid. That doesn't help margins.
On top of that pressure, Proterra doesn't recognize revenue until it delivers those buses. Inflation rose in the meantime, further cutting into its margins. Contracts are typically signed 12 to 18 months prior to bus manufacturing, Proterra said in a day one declaration filing with the U.S. Bankruptcy Code in the District of Delaware. "Contracts signed in 2021 proved to be priced below where the manufacturing costs were ultimately realized in 2022," the company noted.
Making the situation even worse? Supply chain constraints, which led to delays significant enough that Proterra ended up paying penalties to contract supplier TPI Composites. Proterra said in the filing it was able to renegotiate the TPI contract to lessen the penalties to some degree, but it still faced liabilities from an inability to accept the agreed-upon bus body minimums. Proterra and TPI also faced penalties for delivering buses late to its customers.
Atop all of these challenges, one of the bigger issues -- and one that existed long before the economic conditions changed -- are the special needs of transit agency customers. Every transit agency has different requirements for its buses, meaning every bus contract can have vastly different manufacturing requirements than the one before.
"These transit agencies demand highly customized buses that align with the other buses in their respective fleets," Proterra wrote in the filing. "Therefore, the manufacturing process requires much customization, which makes scaling the business difficult and requires an extensive amount of working capital."
Proterra still intends to continue as a business. Its hope — stated when it voluntarily filed for protection under Chapter 11 — is that the move will "strengthen its financial position" through a recapitalization or going-concern sale.
"The reorganization is intended to maximize the value of each independent business line," said Proterra spokesperson Shane Levy told TechCrunch, noting that it's in progress and the end result is unclear.
The company said it will continue operations and will make a request to the bankruptcy court to use existing capital to pay employee salaries and compensating vendors and suppliers.
In the meantime, Proterra has canceled its earnings call scheduled for August.
The company said that Moelis & Company LLC is acting as Proterra's investment banker, FTI Consulting as financial advisor, and Paul, Weiss, Rifkind, Wharton & Garrison LLP as legal advisor.
Proterra won’t fight Nasdaq delisting following bankruptcy filing
Alan Adler
Wed, August 9, 2023
Proterra Inc. said it won't fight its Aug. 17 delisting from the Nasdaq following its filing for bankruptcy protection. (Photo: Proterra Inc.)
Electric bus and battery maker Proterra Inc. won’t fight its Aug. 17 delisting from the Nasdaq as it works on a bankruptcy reorganization plan.
Proterra filed for Chapter 11 bankruptcy protection on Monday. On Tuesday, shareholders exited the company in droves. Shares fell 88% to close at 17 cents. They fell an additional 10.29% Wednesday to 15 cents. Proterra warned what could happen in its second-quarter 10-Q filed with the Securities and Exchange Commission.
“Our post-bankruptcy capital structure is yet to be determined, and any changes to our capital structure may have a material adverse effect on existing debt and security holders, including holders of our common stock,” Proterra said.
In other words, a wipeout.
Shareholders on June 23 approved the doubling of authorized shares from 500 million to 1 billion, intended to give Proterra flexibility to raise capital by selling new shares. As of June 30, about 227.8 million shares of common stock were outstanding.
Q2 loss narrows while revenue rises
According to the 10-Q, Proterra’s revenue rose to $77.1 million from $70.3 million a year ago. The quarterly loss was $31 million, or 14 cents a share, compared to $42 million, or 19 cents, a year ago.
Massive debt — $175.9 including $22.4 million of interest — was a catalyst that drove the Burlingame, California-based company to seek bankruptcy protection. The filing shields Proterra from having to pay the loan, which became due immediately when Proterra filed its bankruptcy petition.
Proterra plans to keep operating and will ask the bankruptcy court to allow it to use its $62.4 million in cash and equivalents to pay employee salaries and suppliers while blocking collection of debt.
“We are subject to the risks and uncertainties associated with Chapter 11 proceedings, including the approval by the bankruptcy court of our use of cash collateral,” the 10-Q filing said. “Operating under bankruptcy court protection for a long period of time may harm our business.”
Customers wait for battery packs
Battery pack production is especially important to Nikola Corp., which said it was relying on Proterra to provide packs for its fuel cell electric trucks going into production this quarter.
Nikola’s issues with its main battery supplier, Romeo Power, have cost the company tens of millions after it purchased Romeo for $144 million in stock a year ago. Nikola is liquidating Romeo’s assets after pulling back on production of battery-electric trucks. If Proterra cannot deliver packs for the trucks, Nikola could face another challenge to its survival.
Proterra also supplies battery packs to Daimler Truck North America for its Freightliner Custom Chassis Corp. and Thomas Built Bus subsidiaries. DTNA invested in the special purpose acquisition company that took Proterra public in 2021. Former DTNA CEO Roger Nielsen became Proterra’s chairman in May.
Proterra wants to separate its three business units and is looking for buyers for one or more of them.
Based on Q2 results, the strongest candidate to go appears to be the bus business, which is the legacy operation started 19 years ago. Revenue fell to $21.1 million from $50.8 million a year ago. Proterra Powered & Energy booked $64.6 million in revenue compared to $23.7 million a year ago.
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