Form 4: Glencore Invests $75 Million in Li-Cycle Through Senior Secured Convertible Note

Glencore Canada Corporation is set to invest $75 million in Li-Cycle Holdings Corp. through a senior secured convertible note, while also amending and restating existing convertible notes.

Summary

• Glencore plc, Glencore International AG, and Glencore Canada Corporation (collectively, the 'Reporting Persons') have filed a Form 4 regarding transactions with Li-Cycle Holdings Corp.
• On March 11, 2024, Glencore Canada Corporation entered into a Note Purchase Agreement with Li-Cycle to purchase a senior secured convertible note for $75 million.
• The closing of the transaction is expected around March 25, 2024.
• The note can be converted into common shares at $0.53 per share, potentially resulting in up to 141,509,433 shares.
• The senior secured convertible note matures five years from the closing date.
• Interest is payable semi-annually, either in cash (secured overnight financing rate plus 5%) or in kind (PIK) at the Issuer's election (secured overnight financing rate plus 6%).
• Existing convertible notes will be amended and restated into two tranches ('A&R Convertible Notes').
• The aggregate outstanding principal of the Existing Convertible Notes as of March 13, 2024, includes $25,357,584.66 in PIK interest.
• The A&R Convertible Notes have event-driven modifications tied to the Rochester hub project, with potential conversion price adjustments.
• The A&R Convertible Notes accrue interest until the Modification Date, payable semi-annually in cash or PIK, and are due on May 31, 2027.
• Upon each Modification Date, the terms of the applicable A&R Convertible Note will mirror the incremental terms of the Senior Secured Convertible Note.

Sentiment

Score: 7

Explanation: The sentiment is moderately positive. While the investment from Glencore is a positive sign, the potential dilution and reliance on the Rochester hub's success introduce some uncertainty.

Positives

• Li-Cycle secures a $75 million investment from Glencore, providing additional capital.
• Amendment and restatement of existing convertible notes simplifies the capital structure.
• The conversion feature of the notes could lead to increased equity ownership for Glencore.

Negatives

• The conversion of the senior secured convertible note could result in significant dilution for existing shareholders (up to 141,509,433 shares).
• The A&R Convertible Notes have event-driven modifications tied to the Rochester hub project, which introduces uncertainty.

Risks

• The closing of the transaction is subject to applicable regulatory conditions.
• The Rochester hub project's progress and financial performance will directly impact the terms of the A&R Convertible Notes.
• The interest rate on the senior secured convertible note is based on the secured overnight financing rate, which is subject to market fluctuations.
• The Issuer's election to pay interest in cash or PIK could impact its cash flow.

Future Outlook

The document outlines the terms of a new investment and the restructuring of existing debt, suggesting a focus on securing financing for future operations, particularly related to the Rochester hub project.

Industry Context

This investment reflects continued interest in the battery recycling sector, with Glencore solidifying its position as a key player in the Li-Cycle's financial structure. The deal is happening during a period of increased scrutiny and volatility in the battery materials and recycling market, as companies navigate fluctuating commodity prices and evolving regulatory landscapes.

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 uncertain near-term profitability.
• The interest rates and conversion terms are within the typical range for such instruments, but the specific terms are tailored to Li-Cycle's unique situation and the Rochester hub project.
• Glencore's involvement is similar to strategic investments made by other major players in the battery materials supply chain, such as Ganfeng Lithium's investments in various lithium projects.

Stakeholder Impact

• Shareholders may experience dilution if the convertible notes are converted into common shares.
• Employees benefit from the company securing additional funding.
• Customers and suppliers can expect continued operations and potential growth due to the investment.
• Creditors are impacted by the restructuring of existing debt.

Next Steps

• Closing of the $75 million investment transaction around March 25, 2024.
• Amendment and restatement of the existing convertible notes.
• Monitoring the progress of the Rochester hub project and its impact on the A&R Convertible Notes.

Key Dates