Li-Cycle Holdings Corp. (NYSE:LICY), a leader in hazardous waste management trading at $1.63 per share, announced on Monday an expansion of its financial agreements with Glencore (OTC:GLNCY), a key investor. This development follows the fulfillment of a condition related to a U.S. Department of Energy loan, which was met earlier in November. According to InvestingPro data, the company operates with a significant debt burden of $435.8 million and has been quickly burning through cash.
On December 9, 2024, Li-Cycle's subsidiaries entered into a Note Guaranty, providing Glencore with a first priority security interest in their assets, including intellectual property. The agreement also includes a pledge of the equity interests of each subsidiary involved.
This action is part of an adjustment to the existing financial arrangements between Li-Cycle and Glencore, which initially began with a senior secured convertible note issued for $75 million in March 2024.
The adjustment was triggered by Li-Cycle meeting a loan financing condition, leading to the automatic amendment of an amended and restated unsecured convertible note. This amendment adjusts the conversion price to $3.03 per share, increasing Glencore's pro forma fully-diluted ownership in Li-Cycle to approximately 66%.
InvestingPro analysis indicates the stock is currently trading below its Fair Value, with analysts setting price targets between $2.25 and $3.00 per share.
The subsidiaries of Li-Cycle involved in the Note Guaranty have agreed to the terms, which are consistent with the guaranty provided for the senior secured note. Furthermore, the agreement stipulates that Li-Cycle's U.S. subsidiaries are exempt from providing additional security or guarantees until at least January 15, 2025.
This strategic financial move is expected to strengthen Li-Cycle's position in project financing for its Rochester Hub project, with the company securing the necessary backing from a prominent investor.
With a current market capitalization of just $39.94 million and a weak financial health score according to InvestingPro, this backing appears crucial for the company's future. The details of the Note Guaranty and related agreements have been filed with the SEC and are incorporated by reference into this report. This article is based on a press release statement.
In other recent news, Li-Cycle Holdings Corp. has reported significant advancements in its Q3 2024 earnings call. The company announced a 79% surge in revenue to $8.4 million, primarily driven by increased recycling service revenue and favorable metal prices.
Concurrently, Li-Cycle closed a $475 million loan agreement with the U.S. Department of Energy to support the construction of the Rochester Hub project in New York, a potential first commercial-scale facility for hydrometallurgical resource recovery of battery materials.
These recent developments also include a decrease in SG&A expenses by 50% year-over-year to $12.9 million due to restructuring. Analysts note that Li-Cycle's objectives include securing full funding for the Rochester Hub, finalizing project analyses, and optimizing the Spoke network for financial sustainability. The company also anticipates a significant increase in recycling materials by 2030, driven by the rising number of EVs and manufacturing scrap.
However, bearish highlights suggest that the company is reliant on manufacturing scrap for battery input feed, and operations at the New York Spoke have been curtailed. Bullish highlights include the finalized U.S. 45X tax credit expected to provide financial incentives for the Rochester Hub and the projected growth of the EV market in North America at a CAGR of approximately 20% from 2025 to 2030.
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