Financially troubled Canadian battery resource recovery company Li-Cycle Holdings Corp. (LICYF-X) has filed for bankruptcy protection under the Canadian Companies Creditors Arrangement Act (CCAA) as it continues to seek buyers or investors to keep its international business operating.

Li-Cycle has also entered into a $10.5-million debtor-in-possession financing facility with Glencore Canada Corp., which will allow portions of its business to continue operating while the financial proceedings play out. Glencore has been a major investor in Li-Cycle and is its largest secured creditor.

Additionally, Li-Cycle has entered into a “stalking horse” credit purchase agreement with Glencore, of at least $40 million, for some of Li-Cycle’s subsidiaries and assets. These include its Arizona Spoke, Alabama Spoke, New York Spoke, Germany Spoke, Rochester Hub project, and its intellectual property, as well as assumption of certain liabilities.

The CCAA court must approve this bid.

Li-Cycle's operations and recent history

Li-Cycle operates its resource recovery business as a patented series of Spoke and Hub facilities. Spokes obtain the batteries and other materials to begin the recovery process, and then ship partially recycled materials to Hub locations for final processing into the materials sold to companies which will use them in new products.

The court ordered a stay of any proceedings against Li-Cycle until May 22, and appointed Alvarez & Marsal Canada Inc. as monitor of the proceedings to assist the company with its restructuring efforts and report to the court. At that date, a further stay can be determined to allow additional time for the restructuring.

The company’s U.S. subsidiaries (including Li-Cycle Inc., which owns its Spokes in Arizona, Alabama and New York, and Li-Cycle North America Hub, Inc., which owns its Rochester Hub project) have commenced Chapter 15 bankruptcy proceedings, seeking recognition of the CCAA proceedings as a “foreign main proceeding”. 

In the announcement Wednesday night, Li-Cycle states its Germany Spoke is expected to have sufficient working capital to continue operating during the CCAA proceedings. Other European subsidiaries are being wound down, except its operating businesses in Switzerland and Germany.

The company will also wind down its subsidiaries in Asia.

The creditor protection filing puts Li-Cycle in default on a series of loan and financing agreements. This includes a $475-million U.S. Department of Energy (DOE) financial instrument. However, Li-Cycle had not drawn down any funds under the DOE facility as it had failed to meet requirements for the release of the initial tranche.

The company’s board of directors and management will remain responsible for its day-to-day operations.

Li-Cycle will no longer qualify to trade on the OTCQX Best Market - it has moved to the OTC Pink Markets effective May 15.