On 23 June, Livent announced the pricing of a new US$225.0M to US$258.8M debt facility, which is expected to provide the company with between US$217.8M and US$250.6M net of raising expenses. The debt proposed to be raised is in the form of Green Notes, meaning the funds must be used for eligible green projects which align with the International Capital Market Association Green Bond Principles 2018. The notes bear an interest rate of 4.125%/pa and will mature in July 2025. Furthermore, these notes are convertible at an equivalent rate of approximately US$8.73/share. This represents a 35% premium to Livent’s share price on the 22 June but is well below the company’s IPO price of US$17/share in October 2018.
In what could be considered a shrewd move by Livent, the debt facilities would provide reasonable breathing room throughout what Roskill forecasts, will be a tough period for lithium producers. Near-term lithium prices are expected to remain weak as demand falters in the wake of the COVID-19 pandemic and as the lithium market works through significant inventories, particularly those of spodumene, that have been accrued over the past 12-18 months.
As of end-March 2020, Livent’s long-term debt liability totalled US$211.1M, which is associated, predominantly, with the company’s investment in new production capacity at its existing facilities in Argentina, China and the USA; although, the company did suspend all capital expansion work in March as the COVID-19 pandemic took hold. The existing debt is linked to a credit facility entered into in September 2018. This initially gave Livent the ability to borrow US$400M ahead of its expiry in 2023.
The new Green Notes can be used for on-going investments or to refinance existing investments in “Eligible Green Projects”, as long as they have been made within the preceding 24-months (which covers the duration of Livent’s existing credit facility). Livent’s green eligibility is linked to “facilitating the growth of electrification with a focus on the transport sector” through the production of lithium carbonate and hydroxide. As such, Livent’s new production capacity can only be used to supply the lithium-ion battery supply chain, though this should not be a concern as lithium’s growth story is so tightly linked to the global electrification of transport.
Roskill’s Lithium Cost Model Service is designed to provide miners, financial institutions, governments, and other industry stakeholders with an in-depth understanding of the costs involved throughout the lithium supply chain; for more information, click here.
Roskill’s NEW Lithium: Outlook to 2030, 17th Edition report will be published in July 2020; click here to download the brochure and sample pages for the report, or to access further information.