Form 4: Glencore Reduces Li-Cycle Convertible Note

Glencore entities, as 10% owners and directors of Li-Cycle Holdings Corp., reported a reduction in the principal amount of a convertible note held by Glencore Canada Corporation following an asset purchase agreement.

Summary

• Glencore plc, Glencore International AG, and Glencore Canada Corporation (collectively "Reporting Persons") filed a Form 4 regarding their beneficial ownership in Li-Cycle Holdings Corp.
• Glencore Canada Corporation's Amended and Restated Convertible Note 1 (A&R Note 1), originally $124,059,131.32, was reduced by $30,867,124.
• This reduction was a result of a credit bid under an Equity and Asset Purchase Agreement (EAPA) approved by courts on August 1, 2025 (Ontario) and August 4, 2025 (US).
• The remaining outstanding principal amount of A&R Note 1 is $93,192,007.32, exclusive of accrued interest.
• The A&R Note 1 is convertible into Common Shares at a price of $2.33 per share (as of August 7, 2025) and matures on December 9, 2029.
• The $30,867,124 reduction is convertible into up to 13,247,693 Common Shares.

Sentiment

Score: 3

Explanation: The filing details a transaction stemming from court-approved restructuring and a credit bid, indicating significant financial distress for Li-Cycle. While Glencore's continued involvement suggests strategic interest, the nature of the transaction (asset transfer to reduce debt) is generally negative for the issuer's standalone financial health.

Positives

• The Equity and Asset Purchase Agreement (EAPA) transaction and credit bid were approved by both Canadian and US courts, indicating legal and regulatory clearance for the asset transfer.
• The reduction of the convertible note principal amount by $30,867,124 could simplify Li-Cycle's debt structure or reduce future conversion dilution from that specific portion.

Negatives

• The transaction involves a reduction of a convertible note through a credit bid, which implies Li-Cycle transferred assets and equity interests to Glencore Canada, potentially reducing Li-Cycle's asset base.
• The need for court approval, including a Chapter 15 proceeding, suggests financial distress or restructuring for Li-Cycle.

Risks

• Financial Distress/Restructuring: The involvement of the Ontario Superior Court of Justice (Commercial List) and the United States Bankruptcy Court for the Southern District of New York (Chapter 15 Proceeding) indicates Li-Cycle is undergoing significant financial restructuring or distress.
• Asset Divestiture: The EAPA transaction involved the sale, transfer, and assignment of "Transferred Assets" and "Transferred Equity Interests" from Li-Cycle to Glencore Canada, which could impact Li-Cycle's operational capacity or future revenue streams.
• Dilution Risk: The remaining A&R Note 1 is convertible into common shares, posing a future dilution risk to existing shareholders if converted.
• Debt Obligations: Li-Cycle still has a significant outstanding principal amount of $93,192,007.32 on A&R Note 1, with interest payable in cash or PIK, and mandatory redemption based on excess cash flow.

Future Outlook

The A&R Note 1 matures on December 9, 2029, with interest payable semi-annually and mandatory redemption tied to Li-Cycle's excess cash flow. The note also includes provisions for warrants to be issued to Glencore Canada upon redemption if conversion has not occurred.

Industry Context

This filing reflects a significant transaction between a major global commodities trader (Glencore) and a battery recycling company (Li-Cycle). The involvement of court-approved restructuring (Chapter 15) suggests challenges within the nascent battery recycling industry, possibly related to capital intensity, market volatility, or operational ramp-up issues. Glencore's continued involvement, despite the restructuring, underscores its strategic interest in the battery materials supply chain and circular economy initiatives.

Comparison to Industry Standards

• NA This Form 4 primarily details a specific transaction related to debt restructuring and asset transfer, rather

Legal Proceedings

• An order from the Ontario Superior Court of Justice (Commercial List) dated August 1, 2025, approved the Equity and Asset Purchase Agreement (EAPA).
• An order from the United States Bankruptcy Court for the Southern District of New York dated August 4, 2025, recognized the Ontario order in the Chapter 15 Proceeding.

Related Party Transactions

• Glencore plc, Glencore International AG, and Glencore Canada Corporation are reported as 10% owners and directors of Li-Cycle Holdings Corp.
• The transaction involves Glencore Canada Corporation (an indirect wholly-owned subsidiary of Glencore International AG, which is a subsidiary of Glencore plc) and Li-Cycle Holdings Corp.
• The Equity and Asset Purchase Agreement (EAPA) and the subsequent credit bid and note reduction are transactions between these related parties.

Stakeholder Impact

• Shareholders: Potential for future dilution from the remaining convertible note. The asset transfer via credit bid could reduce the asset base supporting existing shares. The restructuring context implies significant value erosion.
• Creditors: The reduction of the convertible note principal through a credit bid impacts the specific creditor (Glencore Canada) and potentially the overall debt structure of Li-Cycle. The court proceedings indicate a broader impact on creditors.
• Employees/Customers/Suppliers: The asset transfer and restructuring could impact operational stability, future business relationships, and employment, though direct details are not provided.

Next Steps

• A&R Note 1 will continue to accrue interest and mature on December 9, 2029.
• Li-Cycle is subject to mandatory redemption requirements based on excess cash flow.
• Glencore Canada may convert the A&R Note 1 into Common Shares at any time, subject to regulatory conditions.
• Li-Cycle is required to issue warrants to Glencore Canada upon optional or mandatory redemption if the note has not been converted.

Key Dates

Recommendation

The filing reveals Li-Cycle is undergoing significant financial distress and restructuring, evidenced by court-approved proceedings (including a Chapter 15 bankruptcy proceeding) and the transfer of assets and equity interests to a major creditor (Glencore) via a credit bid to reduce debt. This indicates a severe deterioration of the company's financial health and asset base, making it a high-risk investment with substantial downside potential. The remaining convertible debt further adds to future dilution risk. A seasoned investor would view this as a strong signal to exit the position.

Keywords

Li-Cycle, LICY, Glencore, SEC Form 4, Convertible Note, Credit Bid, Asset Purchase, Bankruptcy Court, Chapter 15, Debt Restructuring, Beneficial Ownership, Recycling, Battery Recycling