Li-Cycle files for creditor protection in Canada and the US

Li-Cycle has obtained creditor protection under Canada’s Companies’ Creditors Arrangement Act (CCAA) and has sought similar protection in the United States under Chapter 15 of the U.S. Bankruptcy Code.

The Toronto-based company, which has invested to set up lithium-ion battery recycling collection and reprocessing facilities in both North America and Europe, also has entered into a $10.5 million debtor-in-possession (DIP) financing facility with Swiss metals producer and trader Glencore.

According to Li-Cycle, Glencore also has agreed to propose a stalking horse credit bid of at least $40 million for certain Li-Cycle subsidiaries, assets and liabilities. A stalking horse bid is an initial bid on the assets of a bankrupt company created to set the low-end bidding bar.

Glencore previously has been involved with Li-Cycle both as an investor and by having signed an offtake agreement for the mixed hydroxide precipitate (MHP) product slated to be produced at Li-Cycle’s hub in Rochester. MHP is a metals-bearing product that typically consists of more than 50 percent nickel.

Li-Cycle expects to commence a formal sale and investment solicitation process (SISP) that represents a continuation of its efforts to seek buyers for its business and assets.

The company has received a stay of proceedings for a period that ends this week, and Toronto-based Alvarez & Marsal Canada Inc. has been named as a monitor of the Li-Cycle Group during the CCAA proceedings.

Li-Cycle says its battery collection spokes in Arizona, Alabama and New York its hub in Rochester, New York, are being covered by the Chapter 15 filing with the U.S. Bankruptcy Court for the Southern District of New York.

The DIP facility, if approved by the CCAA court, is with an affiliate of Glencore Canada Corp. It consists of a credit facility of up to $10.5 million that is expected to be used to finance Li-Cycle’s working capital requirements, including for the continued operation of its Germany Spoke.

The stalking horse purchase agreement would include the latter’s purchase of the Arizona, Alabama and New York spoke facilities, the Germany spoke, the Rochester hub as well as intellectual property and the assumption of some liabilities. It too is subject to approval by the CCAA court.

Li-Cycle says it has been actively reducing its cost structure and seeking financing and strategic alternatives to fund its business.

"However, following a thorough review and after careful consideration of all available alternatives and in consultation with legal and financial advisors, the company’s board of directors [determined] that it was in the best interests of the company to commence the CCAA proceedings," the company says.

A hearing has been scheduled before the CCAA court this Thursday, in which the Li-Cycle Group intends to seek the approval of the DIP Facility, the SISP and the stalking horse agreement.