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Electra Battery Materials Corporation (NASDAQ: ELBM; TSX-V: ELBM) (“Electra” or the “Company”) has entered into a term sheet and transaction support agreement with its Lenders pursuant to which it will launch a debt-to-equity conversion that will reduce its convertible debt outstanding by 60% as part of a comprehensive financial restructuring (the “Transaction”). In addition, the Company intends to launch a US$30 million financing (the “Equity Financing”), which will include a US$10 million conditional commitment from the Lenders. Together, the Transaction and Equity Financing are designed to strengthen Electra’s capital structure and provide the funding required to advance the commissioning of North America’s first cobalt sulfate refinery.
Key Terms
- Electra will convert approximately US$40 million of its outstanding Notes, plus accrued and unpaid interest, into equity at a price of US$0.60 per Common Share. This exchange will reduce total debt under the Notes to approximately US$27 million.
- The concurrent Equity Financing will consist of US$30 million of Units at a price of US$0.75 per Unit. Each Unit will consist of one Common Share and one Common Share purchase Warrant, with each Warrant exercisable for one Common Share for US$1.25 for a period of three (3) years from the date of issuance. The Equity Financing is expected to close in tandem with the Transaction.
- Current shareholders will have the right to purchase Units on the same terms as new investors, in proportion to their existing Common Share ownership.
- The remaining 40% of the Notes, plus accrued and unpaid interest, will be exchanged for a new term loan, maturing three years after completion of the Transaction.
- To support operations during the restructuring process, the Lenders are providing US$2 million in short-term bridge debt in the form of 90-day Bridge Notes. In return, the Lenders will gain the right to appoint one director to Electra’s board of directors.
- The Bridge Notes will fund working capital needs leading up to a meeting of shareholders of the Company, regulatory approvals, and the closing of the Equity Financing, mitigating near-term default risk.
- Following completion of the Equity Financing and the Transaction, the Company intends to increase its Board size from five to seven members, with the Lenders having the right to appoint up to three Board members, relative to their ownership stake in the Company.
“Today marks a turning point for Electra,” said Trent Mell, CEO of Electra. “By equitizing a majority of our debt and securing bridge financing, we are taking decisive action to create a sustainable capital structure and advance the steps required to complete the cobalt refinery, including arranging approximately US$30 million in additional capital.
“This restructuring is undeniably dilutive and difficult for existing shareholders, but it is both timely and necessary. We have rigorously explored the alternatives, including asset sales, mergers, and alternative financing structures, and none offered a preferable outcome. The Lenders have provided continued support since construction of Electra’s refinery was paused due to post-COVID inflation and supply chain disruption, including through new debt funding, equity commitments, and multiple waivers or amendments to loan conditions. This transaction preserves the value of our core asset and provides the foundation for future growth.
“With shareholder approval, lender participation, and government support, we will soon be in a position to complete construction of North America’s first cobalt sulfate refinery. This step, though challenging, is essential to strengthening the region’s battery materials supply chain and enabling Electra to become a reliable partner for governments, OEMs, and commercial stakeholders.”
“By significantly reducing our debt and securing new capital, we are strengthening our financial foundation and aligning our funding with a clear, executable path to production,” commented Electra CFO, Marty Rendall. “Together, this restructuring and financing, alongside other well-advanced financing initiatives, are expected to provide the capital needed to complete the refinery and create long-term value across our stakeholder base.”
Electra’s battery materials refinery is central to North America’s efforts to onshore critical mineral supply chains, reduce reliance on China, and strengthen national and economic security. By advancing the continent’s first cobalt sulfate refinery, Electra will provide a low-carbon, domestic source of a material essential for both electric vehicles and defense applications. The Company has already attracted support from multiple levels of government and from its Lender group, reinforcing broad-based confidence in the strategic importance of its project.
Electra | www.electrabmc.com
