Li-Cycle Holdings Corp. (NYSE:LICY), a leader in hazardous waste management, has entered into a series of agreements to fortify its financial foundation, according to a recent 8-K filing with the Securities and Exchange Commission. The company, which specializes in battery recycling, has amended existing agreements and created new financial obligations, chiefly with Glencore (OTC:GLNCY) Canada Corporation.
With a concerning current ratio of 0.6 and total debt of $435.8 million, these financial moves come at a critical time for the company. According to InvestingPro analysis, Li-Cycle operates with a significant debt burden and has been quickly burning through cash.
On Monday, Li-Cycle, alongside its U.S. subsidiaries, and with the consent of the United States Department of Energy (DOE) and Citibank N.A. as Collateral Agent, executed the Omnibus Amendment and Consent Agreement. This agreement modifies the Loan Arrangement and Reimbursement Agreement (LARA) and the Sponsor Support Agreement, both dated November 7, 2024, and is connected to the company's obligations to Glencore.
The company's financial restructuring efforts come amid challenging market conditions, with the stock down over 63% in the past year. For deeper insights into Li-Cycle's financial health and 18 additional ProTips, consider subscribing to InvestingPro.
As part of the agreement, Li-Cycle's U.S. subsidiaries have provided guarantees and security interests in their assets, including intellectual property and equity interests, to secure obligations under the amended and restated unsecured convertible notes issued to Glencore. These notes, originally issued in May 2022 and subsequently amended, include a senior secured convertible note of $75 million and two additional convertible notes with principal amounts totaling over $231 million.
The modifications to the first amended and restated Glencore convertible note took effect on December 9, 2024, with a second modification expected by June 1, 2026. The Omnibus Amendment and Consent Agreement also allows for the amendment of Li-Cycle's nickel sulphate offtake agreement with LG Energy Solution, Inc., delaying supply obligations from 2025 to 2028 and adjusting supply options.
This strategic financial maneuvering by Li-Cycle underscores the company's commitment to securing its long-term financial stability and operational capabilities. The execution of these agreements aligns with Li-Cycle's growth strategy and its focus on enhancing its position in the battery recycling industry.
Despite current challenges, InvestingPro's Fair Value analysis suggests the stock may be undervalued at current levels, though investors should note the company's weak financial health score of 1.37 out of 5 and negative EBITDA of -$108.5 million in the last twelve months.
Investors are advised that these developments are based on statements from an SEC filing and reflect the company's ongoing efforts to manage its financial obligations and strategic partnerships effectively.
In other recent news, Li-Cycle Holdings Corp. reported a 79% surge in revenue to $8.4 million in its Q3 2024 earnings call, primarily driven by increased recycling service revenue and favorable metal prices.
Concurrently, the company 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. In a strategic move, Li-Cycle expanded its financial agreements with Glencore, a key investor, by entering into a Note Guaranty, providing Glencore with a first priority security interest in their assets.
The company also adjusted its financial arrangements with Glencore, which initially began with a senior secured convertible note issued for $75 million in March 2024. This adjustment was triggered by Li-Cycle meeting a loan financing condition, leading to the automatic amendment of an amended and restated unsecured convertible note. As a result, Glencore's pro forma fully-diluted ownership in Li-Cycle increased to approximately 66%.
These developments are part of Li-Cycle's objectives to secure full funding for the Rochester Hub, finalize project analyses, and optimize the Spoke network for financial sustainability. Analysts have indicated that the company anticipates a significant increase in recycling materials by 2030, driven by the rising number of EVs and manufacturing scrap. This is in line with the projected growth of the EV market in North America at a CAGR of approximately 20% from 2025 to 2030.
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