TORONTO — Li-Cycle is under bankruptcy protection in Canada after failing to raise financing needed to rescue its global battery-recycling business.

The proceedings cap a tumultuous two years for the company, once expected to be a key link in the North American electric-vehicle supply chain. It’s faced a string of financial and logistical challenges in recent years that have tanked its valuation and stalled operations. 

Its insolvency adds new headaches, putting it in default of a key loan from the U.S. Department of Energy. The company needed to raise $262.7 million to qualify for its next advance from that loan.

“Among other things, potential investors expressed concern regarding whether the DOE Loan Facility would still be available notwithstanding the current political environment in the United States,” according to court documents in the creditor protection case.  

Li-Cycle previously considered an acquisition bid from Glencore, but the deal crumbled. The bankruptcy case will likely result in the closure of Li-Cycle’s operations in Asia and most of Europe, with the exception of facilities in Glencore’s home base of Switzerland, and Germany, which have enough cash thanks to the mining firm’s recent $10.5 million loan. 

Li-Cycle says Glencore is now making a “stalking horse” bid for at least $40 million of its assets—an increasingly common legal manoeuvre where a bidder sets the floor for other acquisition offers. The new bid, if approved by the courts, could entitle Glencore to most of Li-Cycle’s U.S. and German operations and its intellectual property. Glencore already owns unsecured notes that could be converted to a nearly two-thirds stake in Li-Cycle’s common shares.

On May 1, when Glencore’s initial bid to buy the company fell through, Li-Cycle’s co-founder and long-time CEO Ajay Kochhar announced that he would step down on May 15. 

The Ontario Superior Court of Justice granted Li-Cycle protection under the Companies’ Creditors Arrangement Act and it has commenced Chapter 15 proceedings in New York. The firm expects to have a “comeback” hearing on May 22, where it will seek approval of Glencore’s offer and begin the process of putting the rest of its business up for sale. 

Court documents filed in Ontario this week cite a string of missteps and misfortunes that led to Li-Cycle’s insolvency. Construction on what would be Li-Cycle’s main battery recycling plant in Rochester has been on pause since October 2023 due to spiralling costs. That triggered class-action lawsuit applications in Ontario and New York as well as legal claims against the Rochester property for unpaid fees.

The company’s share price has dropped more than 99 per cent since it was listed on the New York Stock Exchange in August 2021. Its head-count dropped more than 75 per cent “as a result of these challenging circumstances,” court filings reveal.

Li-Cycle’s struggles are also the latest in a long line of financial failures in Canada’s EV sector. Quebec EV bus maker Lion Electric and Northvolt are also under bankruptcy protection. 

“While Li-Cycle has considerable potential to become an industry leader in the growth of the EV battery recycling and supply chain, its current challenges have strained its liquidity,” the court filings said. “If it can overcome its immediate challenges, Li-Cycle is poised to play a key role in a clean energy future.”