Canadian battery recycler Li-Cycle files for bankruptcy protection

Li-Cycle itself announced that it has filed for bankruptcy protection under the Canadian Companies’ Creditors Arrangement Act (CCAA) with the Ontario Superior Court of Justice for itself and its North American subsidiaries. As part of these proceedings, Alvarez & Marsal Canada have been appointed as the ‘monitor’ of Li-Cycle Group. Additionally, the company’s US subsidiaries have initiated proceedings before the US Bankruptcy Court for the Southern District of New York – covering the operating companies at spoke facilities in Arizona, Alabama, and New York, as well as the company’s hub facility in Rochester.

The company specialises in recycling both batteries and the waste created by battery production. It collects and initially processes used batteries and production waste at ‘spoke’ facilities and uses these to create ‘black mass’, i.e. a mixture of the active materials of the batteries, with the remaining materials being sorted out during the process and reused. Then, this black mass is sent off to ‘hub’ facilities, where the raw materials are extracted from it and used to create new batteries.

Li-Cycle has been searching for a buyer for the company or its assets since March, and the company has been struggling with rising costs and delays for some time. Construction of the firm’s Rochester plant, for example, had to be suspended in November 2023 as total costs had exceeded the project schedule.

Initial negotiations with Glencore about a potential deal were already underway in March, and now it appears that Glencore could perform a takeover of Li-Cycle. In Canada, Chapter 15 bankruptcy protection allows Canadian companies that owe their creditors more than $5m to restructure their business and financial affairs. Li-Cycle has now secured debtor-in-possession financing of $10.5m as well as a so-called stalking-horse bid of at least $40m from Glencore.

As part of this bid, Glencore intends to acquire not only the spoke facilities and the Rochester hub in North America but also the ‘German Spoke’, i.e. the Magdeburg plant. The situation is slightly more positive for the German branch. In a press release, Li-Cycle states that this branch is expected to have ‘sufficient working capital’ to continue operations during the bankruptcy proceedings, although it is “currently seeking to wind down some of its European subsidiaries” outside of Germany and Switzerland. So, it’s feasible that the Magdeburg facility could continue working under Glencore.

In November last year, the US Department of Energy finalised a $475m loan for Li-Cycle as a lifeline to the ailing company. It is telling that the company did not draw down any of these funds because it “failed to meet the conditions precedent for the initial advance.”

reuters.com, thedeepdive.ca, alvarezandmarsal.com, li-cycle.com