Form 4: Glencore Increases Stake in Li-Cycle Through Convertible Note Interest Payments

Glencore and its subsidiaries increased their holdings in Li-Cycle through the conversion of accrued interest on senior secured convertible notes into common shares.

Summary

• Glencore plc, along with its subsidiaries Glencore International AG and Glencore Canada Corporation, have increased their potential ownership in Li-Cycle Holdings Corp.
• This increase is due to the payment-in-kind (PIK) of accrued interest on three senior secured convertible notes held by Glencore Canada.
• The interest was converted into common shares at pre-determined conversion prices.
• The New Note saw an increase of $6,573,643.75 in principal, convertible into 1,587,836 common shares at $4.14 per share.
• A&R Note 1 increased by $7,507,960.92, convertible into 2,477,874 common shares at $3.03 per share.
• A&R Note 2 increased by $7,157,109.47, convertible into 93,888 common shares at $76.23 per share.
• The total potential conversion from these interest payments is 4,159,598 common shares.
• The notes have varying maturity dates and interest rates, with some tied to the secured overnight financing rate plus a margin.
• The notes also have mandatory redemption clauses based on a percentage of excess cash flow generated by Li-Cycle.

Sentiment

Score: 7

Explanation: The document indicates a continued financial commitment from Glencore, which is generally positive. However, the potential for dilution and the complexity of the financial instruments introduce some uncertainty.

Positives

• Glencore's increased stake demonstrates continued financial support for Li-Cycle.
• The conversion of interest into shares avoids immediate cash outflow for Li-Cycle.
• The mandatory redemption clauses based on excess cash flow align Glencore's returns with Li-Cycle's financial performance.

Negatives

• The conversion of debt into equity could potentially dilute existing shareholders.
• The complex terms of the convertible notes, including varying interest rates and conversion prices, may be difficult for investors to fully understand.
• The high conversion price of $76.23 for A&R Note 2 may indicate a potential future adjustment.

Risks

• The conversion of the notes into common shares could lead to dilution of existing shareholders.
• The financial performance of Li-Cycle will directly impact the value of the convertible notes and the potential for redemption.
• The modification date for A&R Note 2 introduces uncertainty regarding the final conversion price.
• The mandatory redemption of the notes is dependent on Li-Cycle's excess cash flow, which may be subject to fluctuations.

Future Outlook

The document outlines the potential for future conversions of the notes into common shares and the mandatory redemption of the notes based on Li-Cycle's excess cash flow. The terms of A&R Note 2 are subject to change based on certain events, including the start of commercial production at the Rochester hub.

Industry Context

This filing reflects ongoing financial activity in the battery recycling sector, where companies like Li-Cycle are reliant on significant capital investment and strategic partnerships. Glencore's continued investment signals confidence in Li-Cycle's long-term prospects.

Comparison to Industry Standards

• Convertible notes are a common financing tool in the resource and technology sectors, particularly for companies with high growth potential but limited current profitability.
• The interest rates and conversion terms are specific to the agreement between Glencore and Li-Cycle, and are not directly comparable to other companies without detailed analysis of their specific financing arrangements.
• The mandatory redemption based on excess cash flow is a common feature in project finance and aligns the lender's returns with the company's operational success.
• Companies like Redwood Materials and Ascend Elements also operate in the battery recycling space, but their financing structures and agreements are not directly comparable without further information.

Stakeholder Impact

• Shareholders may experience dilution if the convertible notes are converted into common shares.
• Creditors are impacted by the terms of the convertible notes and the mandatory redemption clauses.
• Employees are indirectly impacted by the financial health and stability of the company.

Next Steps

• Li-Cycle will continue to operate and generate cash flow, which will impact the redemption of the notes.
• The conversion of the notes into common shares will occur as per the terms of the agreements.
• The modification date for A&R Note 2 will be a key event to watch for changes in the conversion price and other terms.

Key Dates

Keywords

Li-Cycle, Glencore, convertible notes, common shares, interest, PIK, redemption, dilution, financing, investment