Li-Cycle updates terms with Glencore, adjusts convertible notes

Li-Cycle Holdings Corp. (NYSE:LICY), a leader in hazardous waste management currently valued at $28.33 million, has updated its financial agreements with Glencore (OTC:GLNCY) Canada Corporation. According to InvestingPro data, the company operates with a substantial debt burden of $435.8 million, making this restructuring particularly crucial.

Today, the company announced the amendment and restatement of senior secured and unsecured convertible notes originally issued to Glencore, as well as an amendment to their Note Purchase Agreement.

The adjustments to the convertible notes, dated January 31, 2025, include provisions that align the interests of Glencore note holders with common shareholders. Notably, these holders will now be entitled to pro rata distributions equivalent to those made to common shareholders and will have the option to have the company repurchase their warrants for cash in the event of a change of control, based on a valuation method known as Black-Scholes lite.

Additionally, the amendments introduce economic anti-dilution adjustments and specify conversion or exchange price adjustments in connection with future common share issuances by Li-Cycle or instruments exchangeable into common shares. The changes also provide for compensation if the company fails to deliver common shares upon conversion of the notes or exercise of related warrants in a timely manner.

Furthermore, the contractual transfer restrictions on the warrants issued in accordance with the Glencore notes and the common shares underlying such warrants have been removed. This move is expected to increase the liquidity and transferability of these financial instruments.

This financial restructuring comes as part of Li-Cycle’s ongoing efforts to streamline its capital structure and enhance financial flexibility, particularly important given its current ratio of 0.6 indicating potential liquidity challenges.

The details of the amended and restated notes and the Note Purchase Agreement amendment are disclosed in the company’s filings with the Securities and Exchange Commission (SEC), which serve as the source of this information. InvestingPro analysis reveals the company’s overall financial health score is weak at 1.2, with 16 additional key insights available to subscribers.

With negative EBITDA of $108.5 million in the last twelve months, the company’s performance metrics are crucial to watch. For comprehensive analysis of Li-Cycle’s financial position and future prospects, investors can access the detailed Pro Research Report available on InvestingPro, which is part of their coverage of over 1,400 US equities.

In other recent news, Li-Cycle Holdings Corp. has made significant strides in its financial structure and revenue growth. The company reported a 79% surge in Q3 2024 revenue to $8.4 million, mainly driven by increased recycling service revenue and favorable metal prices. Concurrently, Li-Cycle secured a $475 million loan agreement with the U.S. Department of Energy for the construction of the Rochester Hub project in New York.

Li-Cycle has also set the pricing for its public offering in the United States, anticipating gross proceeds of approximately $15 million. The offering comprises 15 million units, each containing one common share or a pre-funded warrant to purchase one common share, one Series A Warrant, and one Series B Warrant to purchase additional common shares.

The company has also entered into a series of agreements to fortify its financial foundation, chiefly with Glencore Canada Corporation. As part of the agreement, Li-Cycle’s U.S. subsidiaries have provided guarantees and security interests in their assets, including intellectual property and equity interests, to secure obligations under the amended and restated unsecured convertible notes issued to Glencore.

In a strategic move, Li-Cycle expanded its agreements with Glencore, a key investor, by entering into a Note Guaranty, providing Glencore with a first priority security interest in their assets. As a result of these financial adjustments, Glencore’s pro forma fully-diluted ownership in Li-Cycle increased to approximately 66%.

Furthermore, Li-Cycle has announced an exclusive agreement with an unnamed high-performance luxury vehicle manufacturer to supply its German recycling facility with lithium-ion battery scrap.

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