Nemaska Lithium Inc., Quebec, Canada, yesterday announced that it has accepted a sale proposal structured as a credit bid from a group made up of the Corporation’s largest secured creditor, Orion Mine Finance, Investissement Québec and The Pallinghurst Group, acting through a new entity named Quebec Lithium Partners (The Pallinghurst Group collectively with Investissement Québec being hereinafter, the “Sponsors”), at the conclusion of its previously announced Sale or Investor Solicitation Process (the “SISP”) under the Companies’ Creditors Arrangement Act (the “CCAA”).
After a thorough review, with its financial and legal advisors, of available qualified bids received as part of the SISP and after the withdrawal of other indications of interest as well as a careful consideration of the interest of all of its stakeholders, the Corporation’s Board of Directors, following a unanimous recommendation of its special committee, the recommendation of the Corporation’s advisors and the support of the CCAA Monitor, determined that accepting the Bid was the best alternative for the Corporation.
Terms of the Bid
The transactions contemplated by the Bid are achieved through a reverse vesting order and provide for a reorganization of Nemaska Lithium and its subsidiaries (the “Nemaska Entities”) that involves: (a) the incorporation of a new entity (“Residual Nemaska Lithium”) to ultimately hold certain excluded assets and liabilities of the Nemaska Entities, and (b) the exchange of the common shares of the Corporation for common shares of Residual Nemaska Lithium, resulting in Residual Nemaska Lithium becoming a successor reporting issuer.
The Transaction provides for the acquisition by the Buyers’ Group of the Nemaska Entities’ business and assets (other than certain excluded assets and liabilities to be transferred directly or indirectly to Residual Nemaska Lithium), by way of a reverse vesting order to be sought from the Superior Court of Québec (the “Court”), the culmination of which will result in the Sponsors acquiring, on a 50-50 basis, all of the issued and outstanding shares of an entity resulting from the amalgamation of the Nemaska Entities, which will itself emerge from the CCAA proceedings and subsequently be amalgamated with entities currently controlled by Orion to form the entity that will operate the business of the Corporation (“New Nemaska Lithium”).
The consideration offered under the Bid is comprised of the assumption of liabilities by New Nemaska Lithium totalling at least $146,500,000 (including Orion Mine Finance and the Johnson Matthey Battery Materials Ltd. secured claims), and the transfer to Residual Nemaska Lithium of the Corporation’s cash on hand on closing, subject to certain adjustments (the “Residual Cash”).
Pursuant to the Bid, substantially all of the current employees of the Nemaska Entities will be retained by New Nemaska Lithium in their current roles and responsibilities in all material respects, and all obligations of the Nemaska Entities under the Chinuchi Agreement with the Cree Nation of Nemaska, the Grand Council of the Crees (Eeyou Istchee) and the Cree Nation Government will be assumed by New Nemaska Lithium. New Nemaska Lithium will not be a reporting issuer under applicable Canadian securities laws.
The Sponsors have indicated their intention to invest, from and after closing of the Transaction and subject to the fulfillment of certain conditions and receipt of appropriate approvals, up to $600,000,000 in New Nemaska Lithium (inclusive of amounts paid to Orion in connection with the Transaction) for the financing of the project, comprised of the mine and the electrochemical plant.
Next steps in the restructuring and effect of the sale proposal on the creditors and the shareholders
The Bid is conditional upon the satisfaction of customary closing conditions, including obtaining approval under the Competition Act (Canada) and Court approval. Nemaska Lithium will seek the approval of the Bid and the Transaction contemplated therein by the Court on or about September 14, 2020. If the approval of the Court is obtained, Nemaska Lithium and the Buyers’ Group expect to close the Transaction at the latest on October 15, 2020.
Following closing of the Transaction, Nemaska Lithium expects Residual Nemaska Lithium to present a plan of compromise or arrangement to its creditors in respect of the Residual Cash and any of its residual assets to be received by Residual Nemaska Lithium. Unfortunately, based on the terms of the Bid and the consideration to be received by Residual Nemaska Lithium, holders of the Corporation’s common shares will not receive any payments for, or distributions on, their common shares in connection with the CCAA proceedings, nor will they hold any interest in New Nemaska Lithium following the completion of the plan of compromise or arrangement.