8-K: Li-Cycle Secures Further Waiver Extension from Convertible Note Holders Amidst Strategic Review

Sentiment:

8-K Filing 12 May 2025 7:13 AM

Li-Cycle obtains another waiver extension from Glencore and Wood River Capital, allowing its shares to trade on the OTCQX market until May 13, 2025, while the company explores strategic alternatives.

Delay expectedThe waiver extension provides Li-Cycle with additional time to explore strategic alternatives while maintaining its OTCQX listing, indicating a delay in finding a long-term solution.

Worse than expectedThe company may need to significantly modify or terminate its operations.The company may need to dissolve and liquidate its assets or file for insolvency protection.There is no assurance that a buyer for the business or assets will be found.

Summary

Li-Cycle Holdings Corp. has received a further waiver extension from convertible note holders Glencore Canada Corporation and Wood River Capital, LLC.
This extension allows Li-Cycle's common shares to continue trading on the OTCQX Best Market until 11:59 p.m. ET on May 13, 2025.
The company had previously disclosed waiver extensions until May 9, 2025.
Despite the waivers, Li-Cycle anticipates needing to significantly modify or terminate operations, potentially leading to asset liquidation or insolvency protection.
Alvarez & Marsal Corporate Finance has been retained to assist in seeking buyers for Li-Cycle's business or assets.
There are no guarantees that buyers will be found or regarding the terms of any resulting transactions.

Sentiment

Score: 3

Explanation: The sentiment is negative due to the company's potential need to liquidate assets or file for insolvency, despite the waiver extension. The engagement of Alvarez & Marsal suggests a serious strategic review, indicating financial distress.

Positives

The waiver extension provides Li-Cycle with additional time to explore strategic alternatives while maintaining its OTCQX listing.

Negatives

Li-Cycle may need to significantly modify or terminate its operations.
The company may need to dissolve and liquidate its assets or file for insolvency protection.
There is no assurance that a buyer for the business or assets will be found.

Risks

The company's ability to continue as a going concern is uncertain.
Li-Cycle faces risks related to sourcing, recovering, and recycling lithium-ion batteries economically and efficiently.
The company's Rochester Hub project may not be developed as anticipated or meet expectations.
Li-Cycle may be unable to attract, train, and retain top talent.
The company's debt obligations and restrictive debt terms pose risks.
Li-Cycle may face litigation or regulatory proceedings that could adversely impact its financial results.

Future Outlook

Li-Cycle anticipates needing to significantly modify or terminate operations, potentially leading to asset liquidation or insolvency protection. The company is exploring strategic alternatives with the help of Alvarez & Marsal Corporate Finance, but there are no guarantees that buyers will be found or regarding the terms of any resulting transactions.

Management Comments

Li-Cycle has retained Alvarez & Marsal Corporate Finance, and certain of its affiliates, to assist in seeking buyers for its business or its assets, including the Company as a whole or any part.

Industry Context

The announcement reflects the challenges faced by companies in the lithium-ion battery recycling industry, particularly those reliant on capital-intensive projects and fluctuating commodity prices. The need for strategic alternatives and potential restructuring highlights the competitive pressures and evolving market dynamics within the sector.

Comparison to Industry Standards

Given the current financial situation, Li-Cycle's actions are similar to other companies in the resource recovery sector facing financial distress.
For example, companies like Redwood Materials, while not directly comparable in business model, have also faced challenges in scaling operations and securing funding.
The retention of Alvarez & Marsal is a common step for companies considering restructuring or asset sales, as seen in other industries facing similar financial pressures.

Stakeholder Impact

Shareholders face the risk of significant losses due to potential liquidation or insolvency.
Employees may face job losses if operations are modified or terminated.
Customers and suppliers may be impacted by changes in Li-Cycle's operations or potential liquidation.
Creditors face the risk of non-payment or reduced recovery in the event of liquidation or insolvency.

Next Steps

Li-Cycle will continue to work with Alvarez & Marsal to seek potential buyers for its business or assets.
The company will continue to assess its financial and operational situation.
Li-Cycle will need to determine whether to significantly modify or terminate its operations, dissolve or liquidate its assets, or file for insolvency protection.

Key Dates

Date	Description
September 29, 2021	Date of Convertible Note issuance to Spring Creek Capital, LLC (later transferred to Wood River Capital, LLC).
May 31, 2022	Date of First and Second Amended and Restated Convertible Notes originally issued to Glencore Ltd.
March 25, 2024	Date of Senior Secured Glencore Convertible Note originally issued and sold to Glencore.
January 31, 2025	Date of Amended and Restated Senior Secured Convertible Note, Amended and Restated Convertible Note No. 1, and Amended and Restated Convertible Note No. 2.
February 25, 2025	Date the Company obtained waivers from each of Glencore and Wood River.
April 30, 2025	Date the Company entered into an agreement with Glencore and Wood River to amend the Glencore Waiver and an agreement with Wood River to amend the Koch Waiver.
May 5, 2025	Date the Company entered into an agreement with Glencore to further amend the Glencore Waiver and an agreement with Wood River to further amend the Koch waiver.
May 8, 2025	Date the Company and Wood River entered into an amendment No. 4 to the Koch Note.
May 9, 2025	Date of Waiver Extension of Glencore Canada Corporation and Wood River Capital, LLC.
May 12, 2025	Date of Li-Cycle's press release announcing the Waiver Extensions from the Convertible Note Holders.
May 13, 2025	Termination date of the waiver extension.
September 29, 2026	Maturity Date of the Amended and Restated Convertible Note.

Keywords

Li-Cycle, Glencore, Wood River Capital, Convertible Notes, Waiver Extension, OTCQX, Alvarez & Marsal, Strategic Alternatives, Liquidation, Insolvency

Disclaimer:The information provided here is for general informational purposes only and does not constitute financial advice, recommendation, or endorsement of any kind. It may contain errors or omissions. You should not rely on this information to make financial decisions. Always seek the advice of a qualified financial professional before making any investment or financial decisions. Use of this information is at your own risk.