Builds upon existing long-term partnership and
further demonstrates Glencore’s endorsement of Li-Cycle’s Spoke
& Hub model, patented recycling technology, and development
plans for the Rochester Hub, as part of Glencore’s ambition to
bring more circularity to the battery materials space
Agreement amends existing Glencore convertible
note to provide for extended maturity, market-based re-pricing and
granting of security interest in two future tranches
Li-Cycle Holdings Corp. (NYSE: LICY) (“Li-Cycle” or the
“Company”), a leading global lithium-ion battery resource recovery
company, is pleased to announce that it has entered into an
agreement (the “Note Purchase Agreement”) to issue a senior secured
convertible note in an aggregate principal amount of $75 million
(the “Note”) to an affiliate of Glencore plc (LON: GLEN)
(“Glencore”), a leading producer, recycler, and marketer of nickel
and cobalt for the production of lithium-ion batteries.
Ajay Kochhar, Li-Cycle co-founder and CEO, commented: “We are
pleased to secure an additional $75 million investment from
Glencore, following Glencore’s June 2022 investment, to improve our
liquidity position while we continue our ongoing comprehensive
review process. This financing enhances Li-Cycle and Glencore’s
existing long-term, strategic partnership and represents an interim
step in our funding strategy to support Li-Cycle’s future plans. We
also continue to work closely with the U.S. Department of Energy on
the conditional commitment for a loan of up to $375 million.”
Tim Johnston, Li-Cycle co-founder and Executive Chairman,
commented: “As part of our previously announced comprehensive
review, Li-Cycle is continuing to review our global recycling
network. We are also reviewing our go-forward strategy for the
paused Rochester Hub, including analyzing potential end-product mix
options and construction strategy. We believe the demand for
critical battery materials continues to accelerate and Li-Cycle
continues to work to position itself as a future leader in the
production of critical battery materials through our sustainable,
safe, and patented recycling technology.”
Kunal Sinha, Global Head of Recycling for Glencore, and
Non-Executive Director of Li-Cycle’s Board of Directors, commented:
“Glencore is committed to bringing scalable and sustainable
circularity into the supply chain of battery materials. Our
original investment in Li-Cycle, alongside key commercial
agreements, formed part of this strategy. Today, we are pleased to
further support Li-Cycle through this additional $75 million
investment so both Li-Cycle and Glencore can continue to build the
battery circularity platform of choice for our customers.”
Following the announcement by the Company in October 2023 in
respect of the Rochester Hub, the Company formed a Special
Committee (the “SC”) composed solely of independent and
disinterested members of the Board (and which excluded Glencore’s
Board representative). The SC engaged Moelis & Company LLC, a
leading global investment bank (“Moelis”), as its financial advisor
and placement agent. The SC, with the assistance of Moelis,
conducted a robust process to review and evaluate potential
financial and strategic alternatives available to the Company.
After a careful review and assessment of the alternatives
identified by the SC through this process, the Company entered into
the agreement with Glencore.
Li-Cycle management expects to provide its full-year 2023
financial and operating results on or before March 15, 2024 as part
of the filing of its Annual Report on Form 10-K for the year ended
December 31, 2023.
Long-Term Global Partnership
As previously announced, Glencore has designated Li-Cycle as one
of its preferred recycling partners, and Li-Cycle and Glencore
entered into a strategic commercial partnership aimed to create an
integrated platform to supply a global customer base with both
primary and recycled critical battery materials. As part of the
partnership, Glencore previously made a $200 million investment in
Li-Cycle in June 2022 through the purchase of a convertible note
(the “Existing Note”).
Glencore is a battery feedstock partner for Li-Cycle’s Spoke
facilities, as well as a future supplier of both black mass and key
reagents for Li-Cycle’s future Hub facilities. Glencore complements
the Company’s existing partners through off-take and marketing of
Li-Cycle’s end products and certain by-products produced and
expected to be produced at certain of the Company’s Spokes and
Hubs.
Glencore Financial Investment Terms
The Glencore investment will result in Glencore purchasing from
the Company a senior secured convertible note in the aggregate
principal amount of $75 million. The Note will mature on the fifth
anniversary of closing and will be convertible into common shares
of the Company at an initial conversion price of $0.53 per Li-Cycle
common share. Li-Cycle will be entitled, at its election, to pay
interest on the Note in cash or in-kind (“PIK”). Cash interest
payments will be based on the Secured Overnight Financing Rate
(“SOFR”) plus 5.0% per year, and PIK payments will be based on SOFR
plus 6.0% per year.
The Note is redeemable at the option of Li-Cycle at a redemption
price equal to 100% of the then outstanding principal amount of the
Note being redeemed plus accrued and unpaid interest. Commencing
with the delivery of financial statements for the fiscal year
ending December 31, 2026, the Company will be required to redeem a
portion of the outstanding principal amount of the Note in an
amount (the “ECF Amount”) equal to a specified percentage of the
excess cash flow generated by Li-Cycle and its subsidiaries for the
applicable fiscal year (less certain deductions and subject to pro
rata application to certain other debt of Li-Cycle). On each
redemption date, whether due to an optional or mandatory
redemption, the Company will be required to issue to Glencore a
number of warrants entitling Glencore to acquire a number of common
shares of Li-Cycle equal to the principal amount of the Note being
redeemed on such date divided by the then applicable conversion
price, having an exercise price per share equal to the then
applicable conversion price of the Note so redeemed and expiring on
the sixth anniversary of the initial closing date (the “Redemption
Warrants”). As security for the Company’s obligations under the
Note, Li-Cycle has agreed to give Glencore a security interest in
substantially all of its assets. In addition, certain of Li-Cycle’s
subsidiaries organized in Canada, the United States, Switzerland
and Germany have agreed to guarantee the Company’s obligations
under the Note and provide security interests on substantially all
of their assets (in the case of the U.S. and Canadian subsidiaries)
and certain specified assets (in the case of the German and Swiss
subsidiaries). The Note will also be subject to certain reporting
and affirmative and negative operational covenants, including, but
not limited to, limitations on the incurrence of indebtedness, the
granting of liens, the disposition of assets and the making of
investments, dividends, distributions and payments of junior debt.
Li-Cycle has also granted certain customary registration rights to
Glencore in relation to the Note.
In addition, Li-Cycle and Glencore have agreed to amend and
restate the terms of the Existing Note, in two tranches, each of
which will include new terms that come into effect upon the
occurrence of certain future events (the Existing Note, including
outstanding PIK notes, as so amended and restated in two tranches,
the “A&R Notes”). The first A&R Note will include
modifications to the terms of the Existing Note that take effect on
the date (the “First Modification Date”) that is the earliest to
occur of (a) the date that is one month after the effectiveness and
initial funding, if any, of a project loan financing for the
Rochester Hub, and (b) December 31, 2024. The second A&R Note
will include modifications to the terms of the Existing Note that
take effect on the date (the “Second Modification Date”) that is
the earliest to occur of (a) the first commercial production from
the Rochester Hub, (b) construction costs exceeding the
construction budget set forth in the project loan financing, and
(c) June 1, 2026. At each Modification Date the following terms of
each A&R Note, which mirror the Note, will take effect: the
maturity will be amended to be five (5) years from the applicable
Modification Date, the interest rate will be amended to match the
interest rate applicable to the Note, mandatory redemption will be
required (including, from the First Modification Date and the
Second Modification Date, the ECF Amount in a pro rata amount
across the A&R Notes (to the extent modified) and the Note),
and the Company will provide guarantees and security for the
A&R Notes consistent with the Note. In addition, at each
Modification Date the conversion price for the applicable tranche
will be adjusted to be the lesser of (x) an amount determined on
the basis of a 30-Day VWAP (volume weighted average trading price)
having a reference date equal to the applicable Modification Date
plus a 25% premium, and (y) $9.95 per share (the current conversion
price of the Existing Note).
Glencore is permitted to transfer the Note, the Redemption
Warrants and any common shares issued upon conversion of the Note
or exercise of any of the Redemption Warrants subject to certain
transfer restrictions including compliance with U.S. and Canadian
securities laws, and a prohibition on private transfers to activist
investors, foreign entities of concern or, without the Company’s
consent, any material competitor. Any transferees will be required
to execute a joinder to the Note Purchase Agreement entered in
connection with this transaction and any transferee that would
beneficially own at least 5% of the common shares (on an
as-converted basis) following the transfer will be subject to a
standstill agreement. The common shares issued upon conversion of
the Note or exercise of any of the Redemption Warrants are also
subject to a 12-month lock-up from the closing date.
Glencore has also committed to not acquire beneficial ownership
of additional common shares of the Company in excess of 5.0% of the
then outstanding voting securities of the Company (subject to
certain de minimis exceptions) or to seek to take the Company
private, without the approval of a committee of disinterested
directors of the Company and, in the case of a take-private
transaction, the approval of a majority of the disinterested
shareholders of the Company. The Company has agreed to seat two
additional nominees of Glencore on its Board of Directors for a
total of three nominees, with the first additional nominee to be
identified by Glencore and (subject to customary approvals by the
Company) proposed for election at the Company’s annual general
meeting of shareholders to be held in 2024 and the second
additional nominee to be proposed (subject to customary approvals
by the Company) for election at the Company’s annual general
meeting of shareholders to be held in 2025 or, if earlier, upon the
occurrence of a vacancy on the Company’s Board of Directors,
subject to the Company and Glencore mutually agreeing on such
second nominee. Both additional Glencore Board nominees are not to
be related parties of Glencore and its affiliates and are to be
independent under applicable Ontario securities laws, as well as
SEC and NYSE rules. Glencore has committed to not cause the Company
to avail itself of the controlled company exemption under NYSE
rules.
The issuance and sale of the Note to Glencore is subject to
customary closing conditions and the expiration of the ten-day
period for required notice to shareholders informing them of the
Company’s reliance on the New York Stock Exchange (“NYSE”)
financial viability exception to the NYSE’s shareholder approval
policy discussed below, and is expected to close on or about March
25, 2024. Additional information regarding this announcement may be
found in a Form 8-K that will be filed with the U.S. Securities and
Exchange Commission and in a material change report that will be
filed with the Ontario Securities Commission. Such material change
report is expected to be filed less than 21 days before the
expected date of closing of the transaction due to the expected
shorter period of time between the signing of the agreement with
Glencore and the expected closing of the investment, in order to
enable the Company to address its near-term liquidity requirements
on a more timely basis.
In addition, Li-Cycle entered into an amendment, effective as of
March 11, 2024 (“Amendment No. 1”), to its limited duration
shareholder rights plan entered into on October 31, 2023 (the
“Rights Agreement”), to amend the definition of “Acquiring Person”
to exempt Glencore Canada Corporation (“Glencore Canada”) or its
affiliates and associates (such persons together “Glencore Canada
and GC Affiliates”) from the definition of Acquiring Person and to
permit Glencore Canada and GC Affiliates’ beneficial ownership in
certain circumstances that would otherwise be in excess of the 20%
trigger threshold calculated in the manner set forth in the Rights
Agreement.
Amendment No. 1 provides that Glencore Canada and GC Affiliates
will not be deemed an “Acquiring Person”, either individually or
together, solely by virtue of, or as a result of, (a) Glencore
Canada and GC Affiliates’ beneficial ownership of the common shares
of Li-Cycle issuable upon conversion of the Existing Note, as may
be amended and restated from time to time, including such common
shares of Li-Cycle issuable pursuant to the Company’s right to
elect to pay interest-in-kind pursuant to the terms of the Existing
Note or the issuance to Glencore Canada and GC Affiliates and the
exercise of any warrants upon redemption of the Existing Note in
accordance with its terms; (b) the valid and binding approval,
execution, and delivery of the Note Purchase Agreement and the
issuance of the Note; (c) the issuance to Glencore Canada and GC
Affiliates of the common shares of Li-Cycle upon conversion of the
Note, in whole or part, including any common shares of Li-Cycle
issued in connection with any interest the Company elects to pay
in-kind; (d) the issuance to Glencore Canada and GC Affiliates and
the subsequent exercise of Redemption Warrants; and (e) the
performance or consummation of any of the other transactions
contemplated by the Note Purchase Agreement, the note purchase
agreement for the Existing Note, the Existing Note or the Note (the
foregoing actions, the “Permitted Events”); provided however, that notwithstanding the
foregoing, Glencore Canada and GC Affiliates shall be deemed an
Acquiring Person if Glencore Canada and GC Affiliates become the
beneficial owner of such number of additional common shares of
Li-Cycle representing in excess of 5.0% of the Company’s common
shares outstanding as of the date of the Note Purchase Agreement,
other than subject to certain de minimis exceptions.
The definition of “Acquiring Person” is further amended to
provide an exemption for any transferee of Glencore Canada and GC
Affiliates, and any transferee of any such transferee, that, in any
such case, has acquired beneficial ownership of common shares of
Li-Cycle in accordance with the transfer restrictions set forth in
the note purchase agreement for the Existing Note or the Note
Purchase Agreement, as applicable, including beneficial ownership
acquired as a result of the occurrence of one or more Permitted
Events following such transfer and certain other de minimis
exceptions, without triggering the exercisability of the
rights.
In connection with the entry into the Glencore investment, the
Company has obtained the consent of Wood River Capital, LLC
(“Koch”), to the Glencore investment in respect of the existing
Convertible Note, dated as of September 29, 2021, issued to Koch
(the “Koch Note”), in exchange for the Company agreeing to amend
the Koch Note, as of the closing of the Glencore investment, to
include penalty interest upon an event of default consistent with
the penalty interest provision of the Note and to remove the floor
and ceiling from the definition of SOFR in the Koch Note.
New York Stock Exchange Exception from Shareholder
Approval
Although the issuance of the Note would generally require
approval of Li-Cycle’s shareholders under the shareholder approval
policy of the NYSE prior to the issuance of the common shares
contemplated by the Note, the Company requested and received
confirmation from the NYSE on March 1, 2024 that the NYSE will not
object to the Company’s reliance on the financial viability
exception to the NYSE’s shareholder approval policy pursuant to
NYSE Listed Company Manual Paragraph 312.05.
Prior to entry into the agreement with Glencore, the audit
committee of the Board of Directors of Li-Cycle (the “Audit
Committee”), composed solely of independent and disinterested
members of the Board, determined that the delay associated with
obtaining a shareholder vote prior to consummation of the issuance
of the Note would seriously jeopardize the financial viability of
Li-Cycle, and, on that basis, the Audit Committee expressly
approved Li-Cycle’s reliance on the financial viability exception
to the requirement to seek shareholder approval.
In accordance with NYSE requirements, the Company will mail a
letter to shareholders, not later than ten days prior to the
anticipated closing of the issuance of the Note, notifying them of
its agreement with Glencore to, among other things, issue the Note
and amend and restate the Existing Note and its intention to issue
common shares upon conversion of the Note, the A&R Notes and,
if applicable, the Redemption Warrants, without obtaining approval
from its shareholders (the “Shareholder Letter”).
Multilateral Instrument 61-101 – Protection of Minority
Security Holders in Special Transactions
The foregoing proposed transactions (the “Transactions”) between
the Company and Glencore are considered “related party
transactions” within the meaning of Multilateral Instrument 61-101
– Protection of Minority Security Holders in Special Transactions
(“MI 61-101”) of the Canadian Securities Administrators. In its
consideration and approval of the Transactions, the independent
members of the Board of Directors of Li-Cycle determined that the
Transactions will be exempt from the formal valuation and minority
approval requirements of MI 61-101 on the basis of the “financial
hardship” exemptions in Sections 5.5(g) and 5.7(e) of MI 61-101.
The Company meets the requirements set out in Sections 5.5(g) and
5.7(e) of MI 61-101 based on the independent members of the Board
of Directors of Li-Cycle, acting in good faith, having unanimously
determined that Li-Cycle is in serious financial difficulty, that
the Transactions are designed to improve Li-Cycle’s financial
position, and that the terms of the Transactions are reasonable in
the circumstances of Li-Cycle.
About Li-Cycle Holdings Corp.
Li-Cycle (NYSE: LICY) is a leading global lithium-ion battery
resource recovery company. Established in 2016, and with major
customers and partners around the world, Li-Cycle’s mission is to
recover critical battery-grade materials to create a domestic
closed-loop battery supply chain for a clean energy future. The
Company leverages its innovative, sustainable and patent-protected
Spoke & Hub Technologies™ to recycle all different types of
lithium-ion batteries. At our Spokes, or pre-processing facilities,
we recycle battery manufacturing scrap and end-of-life batteries to
produce black mass, a powder-like substance which contains a number
of valuable metals, including lithium, nickel and cobalt. At our
future Hubs, or post-processing facilities, we plan to process
black mass to produce critical battery-grade materials, including
lithium carbonate, for the lithium-ion battery supply chain. For
more information, visit https://li-cycle.com/.
Forward-Looking Statements
Certain statements contained in this press release may be
considered “forward-looking statements” within the meaning of the
U.S. Private Securities Litigation Reform Act of 1995, Section 27A
of the U.S. Securities Act of 1933, as amended, Section 21 of the
U.S. Securities Exchange Act of 1934, as amended, and applicable
Canadian securities laws. Forward-looking statements may generally
be identified by the use of words such as “will”, “continue”,
“intend”, “contemplate”, “expect”, “potential”, “believe”,
“future”, or other similar expressions that predict or indicate
future events or trends or that are not statements of historical
matters, although not all forward-looking statements contain such
identifying words. Forward-looking statements in this press release
include, for example, statements regarding Li-Cycle’s financial and
liquidity position; statements regarding the expectations regarding
the up to $375 million conditional commitment for a loan by the
U.S. Department of Energy; statements regarding the development of
Li-Cycle’s Hub facilities, including the Rochester Hub; statements
regarding the growth of global demand for critical battery
materials and Li-Cycle’s position as a leading provider of critical
battery materials; statements regarding Glencore’s off-take and
marketing of Li-Cycle’s end products and by-products expected to be
produced at certain of the Company’s Spokes and Hubs; statements
regarding Li-Cycle’s ability to close the Note and the transactions
contemplated thereby; and statements regarding the Company’s intent
to mail the Shareholder Letter and Li-Cycle’s financial viability.
These statements are based on various assumptions, whether or not
identified in this communication, which Li-Cycle believe are
reasonable in the circumstances. There can be no assurance that
such estimates or assumptions will prove to be correct and, as a
result, actual results or events may differ materially from
expectations expressed in or implied by the forward-looking
statements.
Forward-looking statements involve inherent risks and
uncertainties, most of which are difficult to predict and many of
which are beyond the control of Li-Cycle, and are not guarantees of
future performance. Li-Cycle believes that these risks and
uncertainties include, but are not limited to, the following:
Li-Cycle’s ability to continue as a going concern for the
twelve-month period after the date of filing of its 2023 annual
report on Form 10-K; Li-Cycle’s inability to develop the Rochester
Hub, and the risk that those capital projects will not meet
expectations with respect to their productivity or the
specifications of their end products; Li-Cycle’s engagement in
strategic transactions, including acquisitions, that could disrupt
its business, cause dilution to its shareholders, reduce its
financial resources, result in incurrence of debt, or prove not to
be successful; additional funds required to meet Li-Cycle’s capital
requirements in the future not being available to Li-Cycle on
commercially reasonable terms or at all when it needs them. These
and other risks and uncertainties related to Li-Cycle’s business
are described in greater detail in the section entitled “Risk
Factors” in its Annual Report on Form 20-F filed with the U.S.
Securities and Exchange Commission and the Ontario Securities
Commission in Canada on January 31, 2022 and will be set forth
under the Company’s Annual Report on Form 10-K and Quarterly
Reports on Form 10-Q in the future. Because of these risks,
uncertainties and assumptions, readers should not place undue
reliance on these forward-looking statements. Actual results could
differ materially from those contained in any forward-looking
statement. Li-Cycle undertakes no obligation to publicly update any
forward-looking statement, whether as a result of new information,
future developments or otherwise.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240312820713/en/
Investor Relations Nahla A.
Azmy Sheldon D’souza investors@li-cycle.com
Media Louie Diaz
media@li-cycle.com
Li Cycle (NYSE:LICY)
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