On August 27, 2021, North American Lithium Inc. (“NAL”), North America’s only near-term lithium producer, successfully completed its restructuring under the Companies’ Creditors Arrangement Act (“CCAA”) by way of a reverse-vesting order (RVO) type transaction structure under which NAL was acquired by a wholly owned subsidiary of Sayona Québec Inc. (“SQI”). SQI is a joint venture 75% owned by Sayona Mining Limited and 25% owned by Piedmont Lithium Inc.
Facing a pending bankruptcy application by its mining operator and the suspension of its operations, NAL sought and obtained protection under the CCAA in May 2019. A sale and investor solicitation process (“SISP”) was subsequently launched in the fall of 2019. After nearly two years and multiple rounds of the SISP, SQI’s bid was ultimately accepted by the court-appointed monitor, Raymond Chabot Inc.
SQI’s bid was conditional on the acquisition of NAL by way of a RVO type transaction structure. The RVO consists in the sale of the insolvent company’s shares to a purchaser, where certain unwanted assets and liabilities are transferred, assigned and vested in a newly incorporated non-operating company (ResidualCo) as part of a pre-closing reorganization. This structure allows the purchaser to efficiently carry on the operations of the debtor while keeping the existing licences, authorizations, permits, key contracts and fiscal attributes of the debtor. Vesting out unwanted assets and liabilities maintains the existing corporate structure of the debtor companies rather than vesting out the purchased assets into a newly formed entity.
The contemplated transaction also required clearance under the Competition Act (Canada) and Investment Canada Act.
The transaction was submitted to the Superior Court of Québec for approval and for the issuance of a RVO in June 2021. The approval of the transaction was contested by an unsuccessful bidder. The contestation was dismissed by the Superior Court of Quebec, which proceeded to approve the transaction and issued the RVO on June 29, 2021. Revised reasons for judgment were subsequently released on July 9, 2021. A month later, the unsuccessful bidder’s application for leave to appeal was subsequently dismissed by the Québec Court of Appeal.
All conditions, including required clearances under the Competition Act (Canada) and Investment Canada Act, were either satisfied or waived by the purchaser, and the acquisition was completed on August 27, 2021.
The total value of the successful bid was approximately C$200,000,000 which included:
- The full repayment of the debtor-in-possession (DIP) financing;
- The repayment or assumption of the entirety of the debt owed to NAL’s first and second ranked secured creditors;
- The payment of all outstanding municipal taxes to the city of La Corne;
- Assumption of reclamation guarantees in favour of the Ministère de l’Énergie et des Ressources naturelles (Québec Ministry of Energy and Natural Resources); and
- The settlement of the outstanding construction liens registered against the property.