Electra Provides Corporate Update

Rhea-AI Summary

Electra Battery Materials Corporation (ELBM) announces agreement with Noteholders to postpone interest payments, plans Share Issuance and seeks Nasdaq compliance extension. Company settles employee incentive payments with Common Shares.

Positive

• Electra Battery Materials Corporation (ELBM) has reached an agreement with Noteholders to postpone interest payments on senior secured convertible notes.
• The Noteholders have agreed to a waiver allowing the Company to delay interest payments until August 15, 2024, subject to certain conditions.
• The Company will pay accrued interest through a Share Issuance to certain Noteholders, pending TSX Venture Exchange approval.
• Electra Battery Materials Corporation (ELBM) is focused on finalizing financing for a cobalt refinery construction while ensuring stability in its balance sheet.
• The Company is seeking an extension from Nasdaq to regain compliance with the minimum bid price requirement by March 19, 2024.
• Electra Battery Materials Corporation (ELBM) has settled performance-based incentive cash payments to non-officer employees by issuing Common Shares at a deemed price of C$0.81 per share.

Negative

• None.

Financial Analyst

The agreement between Electra Battery Materials Corporation and its Noteholders to postpone interest payments and satisfy a portion through equity issuance is a strategic financial maneuver. This action indicates a focus on liquidity management and balance sheet stabilization, which is crucial for the company's near-term financial health. By deferring cash outflows for interest payments, Electra is able to conserve cash for operational needs, such as the construction of its cobalt refinery. However, this also adds to the principal amount, potentially increasing the long-term debt burden.

The Share Issuance at a discount to market price could dilute existing shareholders' equity but also provides immediate relief from cash interest obligations. The market's reaction to such dilution will depend on investor confidence in the company's future profitability and growth prospects. Additionally, the waiver regarding the resale registration statement may signify the Noteholders' willingness to hold their positions longer, which could be interpreted as a vote of confidence in the company's prospects.

Legal Expert

The terms outlined in the Waiver and the Indenture have legal implications for the company's financial agreements. The condition that Electra must pay the interest immediately in the event of default underscores the importance of maintaining compliance with the Indenture. This legal structure provides a safeguard for Noteholders while offering Electra some flexibility in managing its debt. The need for approval from the TSX Venture Exchange for the Share Issuance also highlights the regulatory oversight involved in such transactions, ensuring that they are conducted in accordance with market rules and protecting the interests of all stakeholders.

Market Research Analyst

Electra's strategy to manage its debt obligations through equity issuance and interest payment deferrals is reflective of broader trends in the battery materials sector, where companies are often capital-intensive and may seek creative financing solutions to manage cash flow. The company's focus on completing the cobalt refinery financing package is indicative of the strategic importance of vertical integration in the battery materials industry to secure supply chains and meet growing demand for electric vehicles. The NASDAQ's Minimum Bid Requirement non-compliance and the subsequent steps to resolve it will be important for Electra to maintain its listing status and access to capital markets, which is vital for its growth trajectory.

TORONTO--(BUSINESS WIRE)-- Electra Battery Materials Corporation (NASDAQ: ELBM; TSX-V: ELBM) (“Electra” or the “Company”) is pleased to announce that the Company and the holders (the “Noteholders”) of US$51 million principal amount of 8.99% senior secured convertible notes (the “Notes”) have entered into an agreement (the “Waiver”) whereby the Noteholders have agreed, subject to certain conditions, to a postponement in the unpaid payment of interest on the Notes payable on the August 15, 2023 and February 15, 2024 interest payment dates (the “Interest”) under the convertible note indenture dated as of February 13, 2023 (the “Indenture”) that governs the Notes. Pursuant to the Waiver, the Company is required to make payment of accrued Interest on August 15, 2024, other than the Interest to be paid through the Share Issuance (as defined below). In the event of a default by the Company under the Indenture, the Company is required to pay the Interest immediately. Pending repayment, the Interest will be treated as additional principal amounts of Notes entitled to the same rights as the Notes under the Indenture, including the accrual of additional interest under the Indenture and the right to convert into common shares in the capital of the Company (“Common Shares”).

The Company has agreed to satisfy US$400,732 of the Interest through the issuance of Common Shares to certain Noteholders (the “Share Issuance”). The Share Issuance will occur at a deemed value equivalent to 95% of the volume weighted average trading price of the Common Shares for the five trading days immediately prior to the issuance. The Share Issuance remains subject to the approval of the TSX Venture Exchange (the “TSXV”), and the Company will issue a further news release once the Share Issuance has been completed confirming the final number of Common Shares issued.

“While our primary focus is completion of the financing package for construction of the cobalt refinery, steps such as today’s support stability within our balance sheet and meeting our near-term obligations to our lenders,” said David Allen, Electra’s CFO.

In addition, subject to certain conditions, the Noteholders have agreed to waive the requirement set out in the Indenture for the Company to file a registration statement to provide for the resale of the Common Shares underlying the Notes and the common share purchase warrants issued on February 13, 2023.

NASDAQ Notice Update

Further to the Company’s news release dated September 22, 2023 regarding its receipt of notice from The Nasdaq Stock Market LLC (“Nasdaq”) on September 21, 2023 stating that the Company is not in compliance with the minimum bid price requirement ("Minimum Bid Requirement"), the Company intends to submit an application pursuant to the Nasdaq Listing Rules for an additional 180-day extension to the notice period under Nasdaq Rule 5810(c)(3)(A)(ii), at which point the Company may be required to take steps to resolve the non-compliance.

If at any time before March 19, 2024, the bid price of the Common Shares closes at or above US$1.00 per share for a minimum of 10 consecutive business days, the Company will regain compliance with the Minimum Bid Requirement.

Employee Share Settlement

Further to the Company’s news release dated February 12, 2024, the Company has settled a total of C$133,857 of earned performance-based incentive cash payments to certain non-officer employees by issuing a total of 165,257 Common Shares at a deemed price of C$0.81 per share to these individuals (the “Share Settlement”). The aggregate Share Settlement is lower than the previously disclosed total of C$157,357, by issuing a total of 194,268 Common Shares, that the Company had anticipated settling.

Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

Cautionary Note Regarding Forward-Looking Statements

This news release may contain forward-looking statements and forward-looking information (together, “forward-looking statements”) within the meaning of applicable securities laws and the United States Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical facts, are forward-looking statements. Generally, forward-looking statements can be identified by the use of terminology such as “plans”, “expects”, “estimates”, “intends”, “anticipates”, “believes” or variations of such words, or statements that certain actions, events or results “may”, “could”, “would”, “might”, “occur” or “be achieved”. Such forward-looking statements include, without limitation, statements regarding completion of the Share Issuance and the postponement of the Interest. Forward-looking statements are based on certain assumptions, and involve risks, uncertainties and other factors that could cause actual results, performance, and opportunities to differ materially from those implied by such forward-looking statements. Among the bases for assumptions with respect to the potential for additional government funding are discussions and indications of support from government actors based on certain milestones being achieved. Factors that could cause actual results to differ materially from these forward-looking statements are set forth in the management discussion and analysis and other disclosures of risk factors for Electra Battery Materials Corporation, filed on SEDAR+ at www.sedarplus.com and with on EDGAR at www.sec.gov. Other factors that could lead actual results to differ materially include changes with respect to government or investor expectations or actions as compared to communicated intentions, and general macroeconomic and other trends that can affect levels of government or private investment. Although the Company believes that the information and assumptions used in preparing the forward-looking statements are reasonable, undue reliance should not be placed on these statements, which only apply as of the date of this news release, and no assurance can be given that such events will occur in the disclosed times frames or at all. Except where required by applicable law, the Company disclaims any intention or obligation to update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240227767374/en/

Heather Smiles

Vice President, Investor Relations & Corporate Development

info@ElectraBMC.com

1.416.900.3891

Source: Electra Battery Materials Corporation

FAQ

What agreement has Electra Battery Materials Corporation (ELBM) reached with Noteholders?

Electra Battery Materials Corporation (ELBM) has reached an agreement with Noteholders to postpone interest payments on senior secured convertible notes.

How will the Company pay accrued interest to Noteholders?

The Company will pay accrued interest through a Share Issuance to certain Noteholders, pending TSX Venture Exchange approval.

What is Electra Battery Materials Corporation (ELBM) focused on amidst the agreement with Noteholders?

Electra Battery Materials Corporation (ELBM) is focused on finalizing financing for a cobalt refinery construction while ensuring stability in its balance sheet.

What compliance issue is Electra Battery Materials Corporation (ELBM) facing with Nasdaq?

The Company is seeking an extension from Nasdaq to regain compliance with the minimum bid price requirement by March 19, 2024.

How did Electra Battery Materials Corporation (ELBM) settle performance-based incentive cash payments to non-officer employees?

Electra Battery Materials Corporation (ELBM) has settled performance-based incentive cash payments to non-officer employees by issuing Common Shares at a deemed price of C$0.81 per share.