Dry chests within a year | Electric Lion needs to find money, and fast

Electric Lion needs to find money, and fast. There is “significant uncertainty” over the future of the Quebec manufacturer of school buses and electric trucks, which must also obtain leniency from its lenders to keep its head above water.

These warnings were launched by the company based in Saint-Jérôme on Tuesday, on the occasion of the disclosure of the third quarter results, where Lion widened its loss in view of seeing its sales decline.

Although the Quebec company had access to approximately US$27 million as of September 30, it must nevertheless replenish its coffers quickly. Otherwise, Lion will run out of money within a year, she warned, in documents filed with regulators.

“This reflects the challenges we face, but it does not mean that we no longer have options,” said the manufacturer’s CEO, Marc Bédard, during a conference call with financial analysts. We continue to evaluate our options for securing financing. »

What are the scenarios studied? Despite analysts’ questions, Lion management had no response to offer, saying only that it could not speculate on a timeline.

For Raphaël Duguay, professor of accounting at Yale University, Lion risks turning once again to governments, which have supported the company on more than one occasion in the past.

“Governments are at a crossroads,” underlines the expert. Lion desperately needs additional funding. In my opinion, there will be no private financing that will materialize. The question is whether the State will want to lend or invest more. »

In the evening, Thursday, the Legault government did not want to comment on the financial situation of the Quebec manufacturer. Last July, Quebec agreed to a loan of 7.5 million to the company to offer it a little oxygen.

Difficult year

The last year has been tumultuous for Lion in a context of a slower shift to electric than anticipated, which was particularly reflected in orders for electric trucks. To tighten its belt, the company carried out several waves of layoffs and layoffs in Canada and the United States, which reduced its workforce to around 750 employees.

In addition, in the rest of Canada, school bus deliveries are slow. Lion blames this situation on the administrative burden of Infrastructure Canada’s Zero Emissions Transit Fund (ZFTF) to explain the slowdown in school bus deliveries.

This program can cover up to 50% of costs when a school carrier electrifies its fleet. Lion believes that the delays are too long before school transporters can know how much they will be entitled to in financial support, which slows down its deliveries. Half of the order book is dependent on the FTCZE.

“We have been informed by several carriers that their requests are being processed,” said Mr. Bédard. Processing times appear to be improving. »

The result of the American election could also put a damper on Lion’s wheels. The election of Republican Donald Trump, less favorable to the electrification of transport compared to the Biden administration, could harm the Quebec company’s business model. The sale of school buses in the United States is also dependent on subsidies.

Questioned about this scenario by an analyst, Mr. Bédard opted for caution.

“I think it’s still too early to know exactly what the impact will be [du résultat de l’élection]he replied. I think we’ll find out over the next few months. »

Need for flexibility

Nevertheless, the next few weeks promise to be decisive for Lion.

It must reach agreements with its lenders to obtain relaxations on requirements, such as the level of liquidity to maintain in its coffers. The grace period surrounding a loan of US 117 million taken out from a banking syndicate expires on November 15.

In another file, a loan of US 22.6 million taken out from the Caisse de dépôt et placement du Québec (CDPQ) and the Quebec firm Finalta Capital matures on November 30.

Mr. Duguay was surprised to see that Lion had nothing to announce to its investors in terms of negotiations with its lenders when presenting its quarterly results.

Despite a trading session where the main indices ended markedly higher, on Wednesday, Lion’s stock dropped 3.7%, or 79 cents, to close at 79 cents on Bay Street.