Magnis investments in iM3NY gigafactory set to face the torch after Chapter 11 bankruptcy filing

The ASX-listed former market darling may lose the $99.5m invested in its gigafactory IM3NY.

Magnis (US) managing director Hoshi Daruwalla (left) and chair Frank Poullas with an unidentified woman. Picture: John Feder

Magnis Energy Technologies shareholders risk a wipe-out after its flagship American battery factory filed for bankruptcy, warning it owes more than $US125m ($199.8m) to lenders.

In filings in the US court system, Imperium3 New York revealed it was filing for Chapter 11 bankruptcy in a bid to stave off being wound up and reorganise its assets.

IM3NY had sought to become a major US “gigafactory” of lithium-ion batteries, supplying the American car market and bringing economic salvation to a depressed part of upstate New York.

However, the move to seek court protection on Monday, US time, in Delaware now sees IM3NY positioned to either sell its business, carve up its assets, or restructure its finances after exhausting all financial options.

The ASX-listed Magnis, which at its peak was worth more than $770m, had staked hundreds of millions of dollars raised from investors on the battery plant, spruiking it as being key to a global network of battery “gigafactories” in America, Europe, Australia and the Middle East.

Magnis founded iM3NY alongside American battery technology company Charge CCCV, which provided the intellectual property for the gigafactories manufacturing activities.

It owns more than 62 per cent of iM3NY, but lost control of the battery gigafactory in November 2023 after lenders swooped on the manufacturing operation after it defaulted on loans.

Staff at iM3NY, Magnis battery gigafactory in Endicott, New York.

Magnis has been suspended from the ASX since November 2023, after The Australian revealed the company had not told investors it had lost control of its key asset, with the corporate regulator now taking court action over the misstatements to the market.

IM3NY has been troubled amid ballooning losses and teetering debt piles.

The company revealed it made a $US142.6m loss last year, with lenders to IM3NY repeatedly selling their loans amid a loss of faith.

Private lenders Atlas Credit Partners first extended a $US100m loan to IM3NY, in an Aon-brokered deal backed by the gigafactories intellectual property.

Atlas Credit Partners, which triggered the debt default, later sold its debts to the Baupost Group, which in turn sold these loans to investment bank HSBC.

In updates to the ASX, Magnis has told shareholders it has no idea what is happening at its flagship asset, telling investors in November it was writing to C4V boss and IM3NY chair Shailesh Upreti “seeking further and better information” but had not yet heard back.

Despite the filings being made on Monday, Magnis only gave a short update to shareholders on the disaster unfolding at IM3NY hours after The Australian first revealed the bankruptcy filing.

In a statement, Magnis told shareholders the bankruptcy had “come to our attention” noting the company would “provide further details as they become available, in accordance with its reporting obligations”.

Magnis has previously been taken to task over its lax disclosures, including failing to reveal intense litigation between Mr Upreti and its chair Frank Poullas over control of the battery factory.

iM3NY chairman Shailesh Upreti.

This comes after Magnis attempted to engineer a board takeover of IM3NY, with Mr Upreti alleging Mr Poullas and his colleagues, including former director Claire Bibby, muted a video call with him before passing a series of verbal motions to take over its board.

As previous revealed, senior Magnis directors warned the company’s investments in IM3NY, which have topped $99.5m, were being made with little detail over rights, entitlements and oversight of the company.

The Chapter 11 filing for IM3NY comes months after the factory laid off almost all staff in October. 

In documents signed by IM3NY’s new chief executive Lukasz Cianciara, who advised the board before being appointed interim CEO in December, revealed the battery factory’s disastrous situation.

This includes blowing through its $125m in loans plus a further $US2.51m in emergency funding from October last year.

This came as IM3NY management sought to sell the battery business or find new investors, with both processes falling flat.

The bankruptcy application also reveals other bankruptcy cases against iM3NY are pending or have already been filed by a debtor.

If the court grants the application, IM3NY’s risk a wipe-out with a court to rule on a rescue plan for the ailing factory.

Magnis’ shares in IM3NY risk being massively diluted, or reissued at a far lower value.

The ASX-listed company is due to file both its quarterly accounts and full year accounts in the coming days.

This comes after Magnis failed to file its full year accounts in September last year after “delays in closing a liquidity transaction has had a consequential impact of delaying the annual audit process”.

The funding crisis at iM3NY comes as Magnis itself also faces a borrowing squeeze, with the ASX-listed operation owing $6.75m after taking out a high-interest loan from a coterie of private lenders.

This included a $704,000 loan from Magnis chair Frank Poullas, and shareholders Jurghen Behrens, Matthew Boysen, Tony Mazzotta, and Mr Poullas’ brother Emmanuel.

However, this cash was repaid in December and the sum lumped into Magnis’ debt pile.

Magnis chair Frank Poullas did not respond to requests for comment.

Do you know more? Contact David Ross – [e-mail] 

Originally published as Magnis investments in iM3NY gigafactory set to face the torch after Chapter 11 bankruptcy filing