Electra Battery Materials to cut debt by 60% in restructuring plan

TORONTO - Electra Battery Materials Corporation (NASDAQ:ELBM; TSX-V:ELBM), currently trading at $1.05 with a market capitalization of $18.9 million and showing signs of financial strain with an InvestingPro Financial Health Score of 1.27 (Weak), announced Thursday it has entered into a term sheet and transaction support agreement with its lenders for a financial restructuring that will convert 60% of its convertible debt to equity.

The restructuring will reduce Electra’s outstanding convertible debt from approximately $67 million to about $27 million through a debt-to-equity conversion at $0.60 per share. With total debt standing at $51.88 million and a concerning current ratio of 0.05, the company also plans to launch a $30 million equity financing at $0.75 per unit, which includes a $10 million conditional commitment from lenders. For deeper insights into Electra’s financial health and detailed metrics, InvestingPro subscribers have access to over 10 additional key financial indicators.

Each unit in the financing will consist of one common share and one warrant exercisable at $1.25 for three years. Current shareholders will have the right to purchase units proportionate to their existing ownership.

To support operations during the restructuring, lenders are providing $2 million in 90-day bridge financing. In exchange, lenders will gain the right to appoint one director to Electra’s board, with the potential to appoint up to three directors following the transaction’s completion.

"By equitizing a majority of our debt and securing bridge financing, we are taking decisive action to create a sustainable capital structure and advance the steps required to complete the cobalt refinery," said Trent Mell, CEO of Electra, in the press release statement.

The remaining 40% of notes will be exchanged for a new term loan maturing three years after the transaction’s completion, with interest payable at 8.99% in cash or 11.125% if paid in kind.

The transaction requires regulatory approvals, including from the TSX Venture Exchange, and shareholder approval at a special meeting expected in October 2025. The company has applied for a waiver of TSXV minimum pricing requirements, as the offering prices do not comply with current regulations.

Proceeds from the equity financing will fund completion of the company’s cobalt refinery in Temiskaming Shores, Ontario, repay the bridge notes, and provide working capital. The urgency of this financing becomes clear considering the company’s stock has declined 31.82% over the past six months, with an Altman Z-Score of -6.66 indicating significant financial distress.

In other recent news, Electra Battery Materials Corporation has initiated metallurgical testing on cobalt feedstock from two North American sources. The testing involves materials from Ontario’s historic Cobalt Camp and Electra’s Iron Creek project in Idaho. This initiative aims to diversify the company’s feedstock pipeline by incorporating domestic sources alongside existing international supply partners. Additionally, Electra Battery Materials announced that shareholders approved all items during its 2025 annual general and special meeting in Toronto. The approval included the appointment of MNP LLP as external auditors and the election of all five director nominees to the board. In another development, H.C. Wainwright adjusted its price target for Electra Battery Materials to $2.20 from $2.40, while maintaining a Buy rating. This adjustment follows Electra’s completion of a feasibility level engineering study for a modular battery recycling facility. The planned facility will recover valuable materials such as lithium, nickel, cobalt, manganese, and graphite from lithium-ion battery manufacturing scrap and end-of-life batteries.

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