Electric Lion on the brink | No lifeguard at one to midnight

Lion Électrique has still not reached an agreement with a group of investors to save its skin, it has confirmed The Press. Barring any surprises, all indications are that the cash-strapped maker of school buses and electric trucks will find itself safe from creditors this week.

If this scenario comes to fruition, 200 million offered by the governments of Quebec and Canada as well as institutions such as the Caisse de dépôt et placement du Québec (CDPQ) and the Fonds de solidarité FTQ will find themselves at risk. Retail investors who bought the company’s shares in recent years also risk finding themselves empty-handed.

“Lion is still in discussions with its investors,” the office of the Minister of Economy, Innovation and Energy, Christine Fréchette, limited itself to saying in a written statement. “We are following the exchanges closely. »

In the absence of an agreement to replenish its coffers – which was still the case at the time of writing these lines – the manufacturer established in Saint-Jérôme will no longer be able to obtain leniency from its lenders. He has already warned that this would force him to turn to Companies’ Creditors Arrangement Act (LACC).

This process would allow the company to benefit from the protection of the courts while it comes to an agreement with its creditors.

CDPQ and Finalta Capital had agreed to give him until Monday to repay a loan of 30 million. December 16 also coincides with the end of a grace period which allows the company to relax the conditions of a 117 million loan taken out from a banking syndicate.

By Sunday evening, the manufacturer had not responded to questions from The Press sent by email to provide an update on its negotiations.

For Yale University accounting professor Raphaël Duguay, Lion’s precariousness makes it difficult to envisage a scenario where she avoids turning to the CCAA.

Despite the manufacturer’s financial setbacks, the Legault government has not closed the door to supporting it financially, provided that the private sector is involved. This scenario is becoming less and less likely.

Unanswered questions

On Sunday, it was not possible to have an idea of ​​the elements that were at odds between Lion and the group of investors – which includes the real estate developer Groupe Mach and the Saputo family holding company (Jolina).

Time is running out for the company, whose coffers are almost empty. As of September 30, it had access to 27 million US dollars. This cushion has diminished since that date.

At the same time, its long-term debt amounts to 293 million US dollars.

It is in this context that Lion laid off 400 people on 1^is last December, its fourth wave of cuts in a year. The activities of its American factory located in Illinois, a complex which cost 150 million, have also been interrupted until further notice.

Its president and CEO, Nicolas Brunet, also left the ship.

Lion recently raised $50 million by selling its innovation center in Mirabel, a complex adjacent to its battery pack factory, to Aéroports de Montréal as part of a transaction announced on December 11.

However, it is the Mach Group, the Saputo Foundation and their partners who will pocket the entire sum because these lenders had mortgage guarantees from the Lion innovation center.

The company’s financial statements also reveal that Investissement Québec (IQ) – the financial arm of the Quebec state – has gradually ceded the guarantees to other lenders who have agreed to help Lion since 2021.

As a result, the state company finds itself behind the banking union, the Mach Group consortium and the duo formed by CDPQ and Finalta in the order of priority of creditors.

Several problems

For about a year, Lion has blamed its liquidity challenges on the administrative burden of a federal transportation electrification program, which would have the effect of slowing down its sales of school buses.

However, there are other factors that come into play. Alongside its assembly line in Saint-Jérôme, in the Laurentians, the manufacturer spent more than 230 million US dollars to build a battery factory in Mirabel as well as its assembly plant in the United States. Production is currently at a standstill in these two complexes.

Added to this is a slowdown in demand while the shift to electricity is slower than expected, a phenomenon that affects the entire industry.

On the floor of the Toronto Stock Exchange last Friday, Lion shares closed at 48 cents. That stock price is a far cry from the peak of around $25 reached in spring 2021 after the company arrived on Bay Street and Wall Street.