Li-Cycle files for bankruptcy, Glencore may want Rochester Hub

Listen to this article

With little cash, a multitude of debt and creditors ready to pounce, Li-Cycle Holdings Inc. has filed for Chapter 15 bankruptcy protection, but that doesn’t necessarily mean its paused Rochester Hub project will be scrapped.

Swiss-based commodity trading and mining conglomerate Glencore has signed a “stalking horse” credit bid of at least $40 million “for certain of Li-Cycle’s subsidiaries and assets,” the Toronto-based lithium-ion battery resource recovery firm announced on Wednesday night.

Those entities include Li-Cycle North American Hub, Inc., which owns the Rochester Hub facility on McLaughlin Road in the town of Greece.

The stalking horse bid means Glencore can submit the first bid on those assets, creating a floor that any future bid must exceed. Glencore already owns $327.4 million in convertible notes in Li-Cycle.

Since pausing construction on the Rochester Hub in October of 2023, Li-Cycle stock has dropped more than 99 percent and the company was booted off the New York Stock Exchange. Now traded on the OTCQX Best Market, the stock closed at 0.094 on Wednesday.

The company has been unsuccessful at raising capital to resume construction on the Greece site and admitted in the bankruptcy papers that it has “virtually exhausted its liquidity.” The total cost for the Rochester Hub has ballooned from a budgeted $560 million to between $850 million and $1 billion, court papers say.

As a result, Li-Cycle has been unable to launch at the Rochester Hub its unique method of recovering valuable metals from spent EV batteries, a process that was to help create a closed-loop clean energy ecosystem.

The Chapter 15 filing in Bankruptcy Court in the Southern District of New York provides Li-Cycle with protection in the United States while reorganization proceedings work their way through the Canadian bankruptcy court.

The filing is hardly unexpected. George Conboy, chairman of Brighton Securities, predicted in November of 2023 that Li-Cycle would have no other choice but to liquidate.

Li-Cycle says the goal of Wednesday’s action is to “identify a transaction or investment opportunity” that will allow the company to continue to exist, to restart operations “at some or all of its paused spokes and to resume construction of the Rochester Hub.”

Li-Cycle has secured a $475 million loan from the Department of Energy (DOE) but those funds remain untouchable. Before the company can start drawing any money from that loan, it must first pay off $89.7 million in existing construction debts on the project and also ensure it has $173 million in reserve.

Neither has happened, and the bankruptcy filing has triggered an event of default clause in the DOE loan. Li-Cycle has yet to draw any money from the loan, and incentives promised by New York State and Monroe County are tied to workforce benchmarks that can only be met once the Rochester Hub is operational.

Glencore agreed to a stalking horse credit bid of at least $40 million, which would include a host of subsidiaries and assets, plus intellectual property and the assumption of certain liabilities, Li-Cycle said.

Li-Cycle had intended to recover resources from spent lithium-ion batteries at the Rochester Hub to produce lithium carbonate and mixed hydroxide precipitate (MHP). The facility was to employ up to 270 workers.

Last year the company slashed its workforce by nearly 80 percent, eliminating more than 400 jobs. Earlier this month Li-Cycle said Ajay Kochhar was “stepping down” as board chair and also leaving his role as president and CEO.

Li-Cycle has been pursuing new investors, but its filing in Bankruptcy Court in the Southern District of New York said potential backers were dissuaded by how the Trump Administration’s green energy policies would impact the DOE loan. They also were fearful of the company’s current debut structure, a slowing EV market and the contingencies on the DOE loan.

Various lawsuits and liens regarding the Rochester Hub have been filed by creditors.

[email protected]/(585) 653-4020