Li-Cycle Holdings Corp. Initiates Creditor Protection Proceedings Under CCAA and Chapter 15 to Support Restructuring Efforts
Li-Cycle Holdings Corp. (OTCQX: LICYF), a prominent global leader in lithium-ion battery resource recovery, today announced that it and its North American subsidiaries (together referred to as the “Li-Cycle Group”) have obtained creditor protection under Canada’s Companies’ Creditors Arrangement Act (CCAA). This legal step was authorized by the Ontario Superior Court of Justice, which issued an initial order (“Initial Order”) to facilitate the Company’s restructuring efforts amid challenging market and operational conditions.
Overview of the Creditor Protection Filing
The Initial Order granted the Li-Cycle Group a stay of proceedings—a court-mandated pause on creditor claims and legal actions—effective until May 22, 2025. This stay protects the Company and its subsidiaries from creditor enforcement actions, giving the Li-Cycle Group the necessary breathing room to stabilize operations and explore restructuring options without the immediate threat of litigation or asset seizure.
In addition, the Court appointed Alvarez & Marsal Canada Inc. as the Monitor, an independent third party responsible for overseeing the Company’s activities throughout the CCAA process. The Monitor’s role includes assisting management with restructuring strategies and reporting back to the Court on the Company’s progress, ensuring transparency and accountability throughout the proceedings.
Parallel U.S. Bankruptcy Proceedings Under Chapter 15
Concurrently, the Company’s U.S.-based subsidiaries, including Li-Cycle Inc.—which manages operations in Arizona, Alabama, and New York—and Li-Cycle North America Hub, Inc., owner of the Rochester Hub project, have initiated Chapter 15 bankruptcy proceedings in the United States Bankruptcy Court for the Southern District of New York. This legal mechanism allows U.S. courts to recognize and enforce foreign insolvency proceedings, in this case, the CCAA process in Canada, as a “foreign main proceeding.”
As part of these Chapter 15 proceedings, the U.S. Bankruptcy Court has imposed a broad stay on creditor actions within the United States against Li-Cycle’s U.S. subsidiaries. This stay prohibits lawsuits, asset seizures, or any attempt to control the Company’s U.S. property, providing protection and allowing for an orderly restructuring in harmony with the Canadian CCAA proceedings.
Strategic Restructuring: Sale and Investment Solicitation Process
The CCAA proceedings will enable Li-Cycle to conduct a court-supervised Sale and Investment Solicitation Process (SISP). The SISP is a structured and transparent process designed to attract potential buyers or investors interested in acquiring parts or the entirety of the Company’s assets and operations. This initiative is a continuation of Li-Cycle’s previous efforts to identify strategic alternatives that maximize value for all stakeholders.
The SISP’s goal is to explore viable options to stabilize and potentially revitalize the business, whether through asset sales, investments, or other restructuring transactions that can preserve jobs, maintain operational capabilities, and improve the Company’s financial footing.
Financing Support Through DIP Facility
To support ongoing operations and restructuring activities, the Li-Cycle Group has entered into a term sheet with an affiliate of Glencore Canada Corporation (“Glencore”), the Company’s largest secured creditor, for a debtor-in-possession (DIP) credit facility. This DIP Facility provides up to $10.5 million in financing intended to fund working capital needs, including the continued operation of the Germany Spoke—one of Li-Cycle’s critical recovery facilities—and to finance restructuring costs related to the CCAA proceedings.
The DIP Facility is subject to Court approval, which is expected to be sought and obtained at the upcoming hearing. If approved, this financing will provide vital liquidity to maintain ongoing business activities and support the SISP.
Stalking Horse Bid Agreement with Glencore
As part of the SISP process, Li-Cycle has entered into a stalking horse purchase agreement with Glencore. In this arrangement, Glencore has committed to submit a “stalking horse” bid, serving as a minimum baseline offer to acquire certain of the Company’s key assets and subsidiaries for a credit bid of at least $40 million.
The assets included under this agreement are Li-Cycle’s Arizona, Alabama, New York, and Germany Spokes, the Rochester Hub project, as well as the Company’s intellectual property. The stalking horse bid also involves Glencore assuming specified liabilities associated with these assets. This agreement will serve as a starting point in the SISP, encouraging other potential bidders to submit competing offers that exceed the baseline price, thereby driving competitive bidding.
Like the DIP Facility, the stalking horse agreement requires Court approval before it becomes effective.
Operational Adjustments and Geographic Focus
The Company anticipates sufficient working capital, including the DIP Facility funds, to continue operations at the Germany Spoke during the restructuring period. However, as part of its strategic realignment, Li-Cycle is taking steps to wind down certain European subsidiaries that are not part of its core operating businesses. The Company plans to retain and continue operating its facilities in Switzerland and Germany, which are critical to its long-term business strategy.
In parallel, the Company is also in the process of winding down subsidiaries in Asia, reflecting a narrowed geographic focus on markets and operations where it can best leverage its technology and expertise.
Impact on Financing and Debt Instruments
The commencement of CCAA proceedings has triggered an event of default under Li-Cycle’s loan agreement with the U.S. Department of Energy (DOE). The Company had not drawn down any funds from this DOE loan facility, as it had not met the conditions required for disbursement. Nevertheless, the default status reflects the significant financial challenges facing the Company.
Additionally, the CCAA filing has caused an event of default under the Company’s convertible notes held by Glencore and Wood River Capital, LLC. Without the stay protections granted by the proceedings, Wood River Capital could have exercised its right to demand redemption of the notes. Meanwhile, the default related to the convertible notes held by Glencore triggered an automatic acceleration of the principal, accrued interest, and any applicable make-whole premiums, making these amounts immediately due and payable.
These developments underscore the urgency of the Company’s restructuring efforts and the importance of the creditor protection framework in providing breathing room to pursue a viable path forward.
Board and Management Actions
Prior to filing for creditor protection, Li-Cycle had actively pursued cost reductions, financing options, and strategic alternatives in an effort to strengthen its financial position. After a comprehensive review and consultation with legal and financial advisors, the Board of Directors, guided by recommendations from a Special Committee of independent directors, concluded that seeking protection under the CCAA was the most prudent course of action.
The Board determined that commencing the CCAA proceedings would facilitate a structured restructuring process aimed at maximizing value and achieving long-term sustainability. Throughout the restructuring, the Board and management will continue to oversee day-to-day operations, operating under the Monitor’s supervision and the Court’s oversight.
Changes to Reporting and Trading Status
The Initial Order also provides relief from certain securities reporting obligations, recognizing the operational and financial realities during restructuring. However, as a consequence of the Chapter 15 proceedings and associated creditor protection filings, Li-Cycle will no longer meet the qualifications for trading on the OTCQX® Best Market.
Effective May 15, 2025, the Company’s shares will be moved to the OTC Pink Markets, a trading platform with fewer listing requirements. This change reflects the Company’s current status but does not affect shareholder ownership or rights.
Upcoming Court Hearing and Next Steps
Li-Cycle Group is preparing for the “comeback” hearing before the Ontario Superior Court of Justice scheduled for May 22, 2025. At this hearing, the Company intends to seek court approval for the DIP Facility and the SISP framework, including formal recognition of the stalking horse credit bid agreement with Glencore.
The Company will also request an extension of the stay of proceedings beyond the initial deadline, providing additional time to complete the restructuring and sale process.
