Nemaska Lithium (TSX: NMX) announced this morning that it had acknowledged a “set-off” in its 2018 senior secured bonds which amounts to US$350 million. In layman terms, as per Wikipedia, a set off is “the right of a debtor to balance mutual debts with a creditor.”
As a result of acknowledging the set-off in the bond arrangement, Nemaska Lithium has applied with the courts for the discharge of the security. The set-off is a result of a technical report published on July 31, 2019, wherein it was identified that the project completion timeline for Nemaska’s Whabouchi mine and Shawinigan electrochemical plant will extend beyond June 2021. As per the terms of the bond, this extended completion date does not fall within the defined term and thus a project completion set-off event was triggered
The set off is good news for Nemaska, as the terms, which included 11.25% interest per annum in addition to the debt being secured by the entire project on a first priority basis, were not overly in Nemaska’s favour. Whats more, is that the entire amount of the bond was still in escrow, meaning that the firm can easily repay the debt plus applicable interest. It also frees up $40 million in restricted cash that was allocated to cash overruns as per the bond terms. Nemaska had originally attempted to rework the terms of the bond to allow it to stay in place, however the resulting terms were stated to be unsuitable.
Nemaska Lithium also added that it is still working with the Pallinghurst Group as previously announced, and that the loss of the bond will not negatively impact those discussions. Nemaska and Pallinghurst remain in exclusive discussions until October 19, 2019.
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