SCHEDULE 13D/A: Glencore Amends Li-Cycle Convertible Notes, Solidifying 66.5% Potential Stake

Glencore has filed an Amendment No. 8 to its Schedule 13D, detailing significant amendments to its convertible notes in Li-Cycle Holdings Corp. and updating its beneficial ownership to a potential 66.5% stake.

Summary

• Glencore plc, Glencore International AG, and Glencore Canada Corporation filed Amendment No. 8 to their Schedule 13D concerning Li-Cycle Holdings Corp.
• The amendment details changes to the Senior Secured Convertible Note, Convertible Note No. 1, and Convertible Note No. 2 (collectively, 'Glencore Notes') and the New Note Purchase Agreement (NPA Amendment) as of January 31, 2025.
• As of February 4, 2025, Glencore beneficially owns 83,537,741 Common Shares of Li-Cycle, representing approximately 66.5% of the outstanding Common Shares.
• This beneficial ownership includes 83,530,318 Common Shares issuable upon conversion of the Glencore Notes (including accrued but unpaid interest through February 4, 2025) and 7,423 Common Shares awarded to Mr. Kunal Sinha.
• The percentage is calculated based on 42,163,821 Common Shares outstanding as of January 30, 2025, plus the shares issuable to Glencore.
• The aggregate outstanding principal amounts of the notes are: A&R Senior Secured Convertible Note: $81,573,643.75; Second A&R Convertible Note No. 1: $124,059,131.32; and Second A&R Convertible Note No. 2: $121,772,741.47 (all inclusive of PIK interest).
• Conversion prices for the notes remain $3.02, $2.33, and $49.60, respectively, subject to future adjustments.

Sentiment

Score: 6

Explanation: The document is primarily a factual update on a significant shareholder's position and the amended terms of their convertible debt. The amendments provide Glencore with enhanced protections and rights, which is positive for Glencore as a noteholder and future shareholder. For Li-Cycle, it clarifies the terms of significant debt and a major shareholder relationship, but also highlights the substantial potential dilution from the conversion of these notes, leading to a neutral to slightly positive sentiment overall.

Positives

• Glencore Canada Corporation (and any warrants) are now entitled to equivalent pro rata distributions made to common shareholders.
• Warrants issued under the Glencore Notes can be repurchased by the Issuer for cash upon a change of control, at the holder's election, based on a Black-Scholes lite valuation.
• Glencore Canada Corporation (and any warrants) are entitled to an economic anti-dilution adjustment, in addition to conversion/exchange price modification, in the event of a reverse stock split or similar share combination.
• Provisions were added to the Glencore Notes (and warrants) for conversion/exchange price adjustments in connection with future issuance of additional Common Shares or convertible instruments.
• Provisions were added to provide compensation if the Company fails to timely deliver Common Shares upon conversion of the Glencore Notes or exercise of related warrants.
• Contractual transfer restrictions on the warrants and their underlying Common Shares have been removed, increasing liquidity for Glencore.

Negatives

• The potential conversion of Glencore's notes represents significant dilution for existing Li-Cycle shareholders, with Glencore's potential stake reaching 66.5% of the class.
• Li-Cycle is now obligated to repurchase warrants for cash upon a change of control, which could be a substantial financial burden.
• Li-Cycle faces potential compensation payments if it fails to timely deliver Common Shares upon conversion of the notes or exercise of warrants.

Risks

• Significant dilution risk for existing shareholders due to the potential conversion of 83,530,318 Common Shares held by Glencore, which would represent 66.5% of the class.
• Financial obligation for Li-Cycle to repurchase warrants for cash upon a change of control, based on a Black-Scholes lite valuation.
• Risk of incurring compensation payments if Li-Cycle fails to timely deliver Common Shares upon conversion of the Glencore Notes or exercise of related warrants.
• Future adjustments to conversion or exchange prices based on new share issuances or reverse stock splits could further impact the company's capital structure and existing shareholder value.

Future Outlook

The conversion prices for the Glencore Notes remain subject to future adjustments in accordance with their terms. Additionally, provisions have been added to specify conversion or exchange price adjustments in connection with any future issuance by Li-Cycle of additional Common Shares or instruments exchangeable or convertible into Common Shares.

Industry Context

This filing primarily details a significant shareholder's updated stake and the terms of their convertible debt, rather than providing broader industry trends. However, it underscores the ongoing financial support and strategic partnership between a major commodities trader (Glencore) and a battery recycling company (Li-Cycle), reflecting the growing importance of circular economy and critical mineral supply chains in the broader industry.

Related Party Transactions

• The entire filing details transactions and agreements between Li-Cycle Holdings Corp. and Glencore (Glencore plc, Glencore International AG, and Glencore Canada Corporation), which is a significant shareholder and noteholder of Li-Cycle. This includes the amendment and restatement of three convertible notes and an amendment to the New Note Purchase Agreement.

Stakeholder Impact

• **Shareholders:** Face significant potential dilution as Glencore's convertible notes, if fully converted, would represent approximately 66.5% of the company's outstanding Common Shares.
• **Glencore (Noteholders/Shareholder):** Benefits from enhanced rights and protections, including pro rata distributions, anti-dilution adjustments, cash repurchase options for warrants upon change of control, and compensation for delayed share delivery, strengthening their investment position.
• **Li-Cycle (Company):** Secures continued financing and a strategic partnership with a major commodities firm but takes on additional obligations related to warrant repurchases and timely share delivery, impacting its financial flexibility and capital structure.

Next Steps

• Future adjustments to the conversion prices of the Glencore Notes based on their terms.
• Potential future conversion of the Glencore Notes into Common Shares of Li-Cycle.
• Potential exercise of warrants issued in accordance with the Glencore Notes.

Key Dates

Keywords

Li-Cycle Holdings Corp., Glencore, SEC filing, Schedule 13D, convertible notes, beneficial ownership, dilution, anti-dilution, warrants, debt financing, shareholder stake, recycling, battery materials