Sherritt Announces Transactions to Extend Debt Maturities and Strengthen its Capital Structure
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OR FOR DISSEMINATION IN THE UNITED STATES
Sherritt Announces Transactions to Extend Debt Maturities and
Strengthen its Capital Structure
TORONTO, March 4, 2025 – Sherritt International Corporation (“Sherritt” or the “Corporation”)
(TSX:S) announced today a proposed transaction (the “ CBCA Transaction”) to extend the
maturities of the Corporation’s notes obligations and strengthen the Corporation’s capital
structure.
The CBCA Transaction, described in further detail below, w ill extend the maturities of the
Corporation’s notes obligations to November 2031, subject to certain conditions, and reduce
Sherritt’s total outstanding notes obligations by up to approximately $32 million by exchanging
Sherritt’s existing notes obligations, comprised of (i) 8.50% senior second lien secured notes due
November 30, 2026 (the “Senior Secured Notes”); and (ii) 10.75% unsecured PIK option notes
due August 31, 2029 (the “ Junior Notes ”, and together with the Senior Secured Notes, the
“Existing Notes”), for amended 9.25% senior second lien secured notes due November 30, 2031
(the “Amended Senior Secured Notes”) and certain early consent considerati on. The CBCA
Transaction will be implemented through a corporate plan of arrangement (the “CBCA Plan”) in
the proceedings (the “ CBCA Proceedings”) commenced today by Sherritt and its subsidiary,
16743714 Canada Inc. (collectively, the “Applicants”), under the Canada Business Corporations
Act (the “CBCA”), as discussed further below.
In connection with the CBCA Transaction, the Corporation and certain holders of Existing Notes
(“Noteholders”) holding, in aggregate, approximately 42% of the outstanding Senior Secured
Notes (the “ Initial Consenting Noteholders ”), have entered into a consent and support
agreement (the “ Support Agreement”) pursuant to which and subject to its terms, the Initial
Consenting Noteholders have agreed to, among other things, support the CBCA Transaction and
vote in favour of the CBCA Plan.
“Today’s announcement marks the culmination of our dedicated multiyear effort to strengthen our
financial position,” said Leon Binedell, President and CEO of Sherritt. “After carefully evaluating
numerous strategies, we are confident that these transaction s represent the optimal path for all
our stakeholders to address the upcoming maturity of Sherritt’s debt. The completion of these
transactions will represent a transformative milestone that will significantly improve our capital
structure, extend the matu rity of our debt obligations to up to late 2031, decrease our debt
outstanding, lower our annual interest expense and enhance our overall financial flexibility. We
will not only address the upcoming debt maturities, but also strategically position Sherritt to
navigate beyond the present challenging market environment, paving the way for a return to
growth and long-term success.”
The Corporation also announced today a transaction to be implemented immediately following
the completion of the CBCA Transaction (the “Subsequent Exchange Transaction”), described
below, that would further reduce the Corporation’s outstanding indebtedness and annual interest
expense. In connection with the Subsequent Exchange Transaction , the Corporation and the
Initial Consenting Noteholders (in such capacity, the “ Subsequent Exchange Noteholders ”)
have entered into exchange agreements (the “ Exchange Agreements”) pursuant to which and
subject to their terms , the Subsequent Exchange Noteholders would , immediately after the
implementation of the CBCA Transaction, exchange a portion of the Amended Senior Secured
Notes received by such Subsequent Exchange Noteholders under the CBCA Plan , at par, for
99,000,000 newly-issued common shares of the Corporation at an exchange price of $0.173 (the
“Exchange Price”) (with such shares issued not exceeding 19.9% of the total common shares of
the Corporation outstanding following the implementation of the Subsequent Exchange
Transaction). The Exchange Price and aggregate number of newly-issued common shares (with
such shares issued not exceeding 19.9% of the total common shares outstanding following the
implementation of the Subsequent Exchange Transaction) may be subject to adjustment based
on the terms of the Exchange Agreements. The Subsequent Exchange Transaction does not form
part of the CBCA Transaction or the CBCA Plan, and is conditional on, among other things, the
implementation of CBCA Transaction.
The CBCA Transaction and Subsequent Exchange Transaction do not affect any other obligations
of the Corporation, and Sherritt will continue to satisfy its obligations to employees, suppliers,
customers and governmental authorities in the ordinary course of business.
Background to the CBCA Transaction
Sherritt has been challenged for many years by historical debt levels. This historical debt relates
primarily to investment in the development of a former joint venture project that is no longer in
Sherritt’s portfolio of assets. Reducing its level of debt and related interest expense have been
and continue to be strategic priorities for Sherritt to improve its long -term financial strength. To
that end, Sherritt has made significant progress, eliminating over $575 million of note and other
debt obligations from its balance sheet over the past approximately seven years.
Beyond repayment of debt, there have been a number of strategic initiatives undertaken by the
Corporation to strengthen its financial position and address its upcoming debt maturities;
however, since 2023, nickel and cobalt prices have declined significantly, reaching their lowest
levels in four years and eight years, respectively, during the fourth quarter of 2024, reducing the
Corporation’s ability to generate excess cash for further material debt repayments. Key strategic
initiatives include:
• Moa Joint Venture Expansion Program: In November 2021, Sherritt announced the
Moa Joint Venture would embark on a low cost, low capital expansion program. Phase
one, the Slurry Preparation Plant (“SPP”), was completed under budget and ramped up to
design capacity in early 2024. The SPP delivers a number of benefits , including reduced
ore haulage, lower carbon intensity from mining and increased throughput over the life of
mine. Phase two, the Processing Plant Expansion, remains scheduled for commissioning
and ramp up in the first half of 2025. With the completion of phase two, annual mixed
sulphide precipitate production is expected to further increase toward the combined
expansion target, of approximately 20% of contained nickel and cobalt , and is expected
to fill the refinery to nameplate capacity to maximize profitability from the joint venture’s
own mine feed, displacing lower margin third -party feeds and increasing overall finished
nickel and cobalt production.
• Cobalt Swap Agreement: In October 2022, Sherritt finalized a cobalt swap agreement
(the “Cobalt Swap”) with its Cuban partners to recover $368 million of total outstanding
Cuban receivables over five years beginning January 1, 2023 , supporting Sherritt’s
strategic objective of strengthening its balance sheet by reducing reliance on its Cuban
partners’ ability to access foreign currency to repay amounts owed to Sherritt. In 2023,
Sherritt successfully completed the first year of the Cobalt Swap which included receipt of
2,082 tonnes of cobalt from the Moa Joint Venture which was sold by Sherrit t, realizing
cash receipts of $80.3 million, a cash dividend of $64.0 million, and a corresponding
reduction in its receivable from General Nickel Company S.A. (“GNC”, 50% partner in the
Moa Joint Venture ) of $76.0 million. In 2024, due to lower prices of nickel and cobalt,
Sherritt focused efforts to maximize distributions under the Cobalt Swap and during the
fourth quarter, received $29.8 million, including $23.7 million in cash and 223 tonnes of
finished cobalt valued at $6.1 million (including both Sherritt’s share and GNC’s redirected
share). Sherritt had finalized the Cobalt Swap agreement in 2022, to repay debt with the
annual minimum amounts. Although Sherritt received the annual minimum amount in
2023, the price s of nickel and cobalt subsequently decreased, which reduced Sherritt’s
ability to receive subsequent annual minimum amounts.
• Energas S.A. (“Energas”) Joint Venture Agreement: In October 2022, Cuba’s
Executive Committee of the Council of Ministers approved the twenty -year extension of
Energas’ Joint Venture generation contract with the Cuban government to March 2043.
The extension of this economically beneficial contract suppor ts Sherrit t’s on -going
investments in Cuba, helps facilitate the Cobalt Swap and supports Cuba’s long -term
energy security.
• Moa Joint Venture Life of Mine Extension: In March 2023, Sherritt filed a National
Instrument 43 -101 – Standards of Disclosure for Mineral Projects compliant technical
report outlining a newly developed strategic life of mine plan based on an economic cut -
off grade methodology, extending the mine life to 2048 based on proven and probable
mineral reserves, an increase of 14 years.
• Energas Optimizations: In 2023, two new gas wells went into production with Unión
Cuba-Petróleo providing gas free of charge to Energas for power generation , driving a
31% year-over-year increase in electricity production at Sherritt’s Power division. In 2024,
maintenance work was completed on three gas turbines in part to bring online an
additional turbine to process gas being received from a third new gas well that was brought
into production during the year. Electricity production at Sherritt’s Power division increased
a further 10% year-over-year in 2024. Dividends in Canada from Energas have increased
from $1.4 million in 2023 to $13.0 million in 2024. In 2025, dividends in Canada from
Energas are expected to significantly increase to be between $25 million to $30 million.1
The Corporation is facing the maturity of its Senior Secured Notes on November 30, 2026. On
maturity, Sherritt will be required to repay or refinance these obligations of over $220 million (plus
interest and applicable premiums). Addressing the upcoming maturity under the Senior Secured
Notes is also necessary to put Sherritt in a position to extend its revolving-term credit facility (the
“Revolving Bank Facility”) which currently matures on April 30, 2026.
1 Based on Power’s 2025 guidance estimates for production volumes (800-850 GWh, 33⅓% basis), unit
operating costs ($23.00-$24.50/MWh) and spending on capital ($2.0 million, 33⅓% basis). Unit operating
costs and spending on capital are non-GAAP financial measures which are reconciled to their most
directly comparable IFRS Accounting Standards measures in the Non-GAAP and other financial
measures section of the Corporation’s Management Discussion & Analysis for the year ended December
31, 2024, dated February 5, 2025, on page 59 and page 62.
Sherritt, with the assistance of its legal and financial advisors, undertook a detailed and proactive
review of potential available alternatives including, among other things, refinancing the Existing
Notes, extending the maturities of the Senior Secured Notes and/or Junior Notes, exchanging
some or all of the Junior Notes for secured debt, exchanging debt for equity, raising equity and/or
new debt financing from third parties to repay all or a portion of the Existing Notes, purchasing
Existing Notes for cancellation, as well as maintaining the status quo.
Following this review of a broad range of possible alternatives, Sherritt concluded that extending
the upcoming 2026 maturity of the Senior Secured Notes and reducing its outstanding debt
obligations and associated interest expense is in the best interests of the Corporation to put it in
a better financial position , create financial and operational stability , and maximize stakeholder
value.
The Corporation has periodically engaged with noteholders and shareholders to listen to and
address their views on the Corporation’s business and capital structure. The Corporation takes
the interests of its various stakeholders seriously and has sought to balance the interests of all
stakeholders in a fair and reasonable manner in connection wit h developing and advancing the
CBCA Transaction and the Subsequent Exchange Transaction.
Key CBCA Transaction Terms
The CBCA Transaction has the following key elements:
• All of the Corporation’s outstanding Senior Secured Notes will be exchanged for Amended
Senior Secured Notes on the implementation date of the CBCA Plan (the “Effective Date”)
as follows:
o each holder of Senior Secured Notes (a “ Senior Secured Noteholder ”) shall
receive as consideration in exchange for its Senior Secured Notes:
▪ Amended Senior Secured Notes in a principal amount equal to the principal
amount of Senior Secured Notes held by such Senior Secured Noteholder
as at immediately prior to the Effective Time (as defined in the CBCA Plan);
and
▪ a cash payment in the amount of accrued and unpaid interest outstanding
in respect of the Senior Secured Notes (calculated at the contractual non-
default rate) held by such Senior Secured Noteholder up to but not
including the Effective Date;
o each Senior Secured Noteholder that is not an Initial Consenting Noteholder and
that votes in favour of the CBCA Plan prior to 5:00 p.m. on March 25, 2025, or
such later date as the Corporation may determine (the “Early Consent Deadline”)
(each, an “ Early Consenting Senior Secured Noteholder ”) shall receive an
additional cash payment in an amount equal to 3% of the principal amount of
Senior Secured Notes voted in favour of the CBCA Plan by the Early Consent
Deadline and held by such Early Consenting Senior Secured Noteholder as at
immediately prior to the Effective Time; and
o each Initial Consenting Noteholder that votes in favour of the CBCA Plan prior to
the Early Consent Deadline (each an “Initial Early Consenting Senior Secured
Noteholder”) shall receive an additional cash payment in an amount equal to 4%
of the principal amount of Senior Secured Notes voted in favour of the CBCA Plan
by the Early Consent Deadline and held by such Initial Early Consenting Senior
Secured Noteholder as at immediately prior to the Effective Time.
• All of the Corporation’s outstanding Junior Notes will be exchanged for Amended Senior
Secured Notes on the Effective Date (the “Junior Notes Exchange”) as follows:
o each holder of Junior Notes (a “ Junior Noteholder ”) shall receive , as
consideration in exchange for its Junior Notes (together with all accrued and
unpaid interest in respect of the Junior Notes up to the Effective Date) , Amended
Senior Secured Notes in a principal amount equal to 50% of the principal amount
of Junior Notes held by such Junior Noteholder as at immediately prior to the
Effective Time; and
o each Junior Noteholder that votes in favour of the CBCA Plan prior to the Early
Consent Deadline (each, an “ Early Consenting Junior Noteholder ”) shall
receive, as additional consideration in exchange for its Junior Notes , additional
Amended Senior Secured Notes in a principal amount equal to 5% of the principal
amount of Junior Notes voted in favour of the CBCA Plan by the Early Consent
Deadline and held by such Early Consenting Junior Noteholder as at immediately
prior to the Effective Time.
• The Corporation and the Majority Initial Consenting Noteholders (as defined in the Support
Agreement) shall have the right to amend the CBCA Plan to remove the Junior Notes
Exchange from the CBCA Plan. Such amendments to the CBCA Plan shall be in form and
substance acceptable to the Corporation and the Majority Initial Consenting Noteholders,
and (i) if such amendments are made prior to the Noteholders’ Meetings (as defined
below), such amended CBCA Plan shall only be required to be approved at the Senior
Secured Noteholders’ Meeting (as defined below) as set forth under the Interim Order (as
defined below), and (ii) if such amendments are made after the Noteholders’ Meetings,
such amended CBCA Plan shall not require any further Noteholders’ Meetings or votes
by Noteholders in respect thereof, and shall be subject to approval of the Court (as defined
below).
• The Amended Senior Secured Notes will be issued pursuant to an amended and restated
notes indenture (the “Amended and Restated Senior Secured Notes Indenture”) on the
Effective Date. The Amended and Restated Senior Secured Notes Indenture will be on
substantially similar terms and conditions as the existing notes indenture governing the
Senior Secured Notes (the “ Senior Secured Notes Indenture ”), subject to certain
amendments to be described in the Circular (as defined below) and the Description of
Notes to be attached thereto (the “Notes Amendments”). Certain key terms of the Notes
Amendments are also summarized in the Schedule to this news release.
• In the event the Junior Notes Exchange is not completed pursuant to the CBCA Plan and
any Junior Notes remain outstanding as at June 30, 2029, the maturity date of the
Amended Senior Secured Notes shall be June 30, 2029 (rather than November 30, 2031).
• Subject to the satisfaction or waiver of the applicable conditions to the CBCA Transaction,
it is expected that the CBCA Transaction will be completed in April 2025.
Key Subsequent Exchange Transaction Terms
The Subsequent Exchange Transaction has the following key elements:
• Pursuant to the Exchange Agreements and subject to their terms , immediately following
the implementation of the CBCA Transaction, the Subsequent Exchange Noteholders will
exchange a portion of the Amended Senior Secured Notes received by such Subsequent
Exchange Noteholders under the CBCA Plan, at par, for 99,000,000 newly -issued
common shares of the Corporation at an exchange price of $ 0.173 (with such shares
issued not exceeding 19.9% of the total common shares of the Corporation outstanding
following the implementation of the Subsequent Exchange Transaction) . The Exchange
Price and aggregate number of newly -issued common shares (with such shares issued
not exceeding 19.9% of the total common shares outstanding following the implementation
of the Subsequent Exchange Transaction) may be subject to adjustment based on the
terms of the Exchange Agreements.
• Upon implementation of the Subsequent Exchange Transaction, the Corporation and each
of the Subsequent Exchange Noteholders will enter into put agreements (the “ Put
Agreements”), which provide, among other things, that the Subsequent Exchange
Noteholders shall be entitled to require the Corporation to repurchase, in aggregate, $45
million of Amended Senior Secured Notes from the Subsequent Exchange Noteholders
on four scheduled repurchase dates (the “Scheduled Repurchase Dates”) at a purchase
price equal to 105% of the principal amount of Amended Senior Secured Notes so
purchased, provided that the Corporation shall have the option to repurchase such
Amended Senior Secured Notes at par at any time up to 120 days prior to the applicable
Scheduled Repurchase Date.
• Upon implementation of the Subsequent Exchange Transaction, the Corporation and one
of the Subsequent Exchange Noteholders will enter into an investor rights agreement (the
“Investor Rights Agreement ”). The Investor Rights Agreement will provide such
Subsequent Exchange Noteholder with certain rights as long as it owns at least 10% of
the outstanding common shares of the Corporation, including the right to nominate one
individual for election or appointment to the board of directors of Sherritt (the “ Board of
Directors”) and a pre -emptive right to participate in future common share offerings by
Sherritt, and will require such Subsequent Exchange Noteholder to refrain from certain
actions or share acquisitions, as to be further described in the Circular.
Following the Corporation’s detailed review process and careful consideration of various potential
strategic alternatives to address the Corporation’s capital structure and upcoming debt maturities,
and taking into account, among other things, the Corporation’s overall capital structure and
financial condition, its debt levels and interest expense, challenging industry dynamics and
geopolitical factors impacting the Corporation, the terms of the CBCA Transaction and the
anticipated benefits of the CBCA Transaction for the Corporation and its stakeholders, the
opinions of independent financial advisor, MPA Morrison Park Advisors Inc . (“Morrison Park”)
(discussed below), and legal and financial advice from the Corporation’s professional advisors,
the Board of Directors unanimously determined that the CBCA Transaction is in the best interests
of the Corporation and its stakeholders.
The Board of Directors unanimously recommends that the Senior Secured Noteholders and
Junior Noteholders vote in favour of the CBCA Transaction.
In addition, taking into account the foregoing matters and the further deleveraging that would
result from the Subsequent Exchange Transaction , and legal and financial advice from the
Corporation’s professional advisors, the Board of Directors also unanimously determined that the
Subsequent Exchange Transaction is in the best interests of the Corporation and its stakeholders.
Morrison Park , an independent financial advisor to the Corporation’s Board of Directors, has
provided an opinion that: (i) the CBCA Transaction is fair, from a financial point of view, to the
Corporation; (ii) the Senior Secured Noteholders and the Junior Noteholders would be in a better
position, from a financial point of view, under the CBCA Transaction than if the Corporation were
liquidated; (iii) the consideration provided under the CBCA Transaction to t he Senior Secured
Noteholders is fair, from a financial point of view, to the Senior Secured Noteholders; and (iv) the
consideration provided under the CBCA Transaction to t he Junior Noteholders is fair, from a
financial point of view, to the Junior Noteholders.
Lender Consent Agreement
The Corporation has entered into a consent agreement with its senior lenders (the “Revolving
Bank Facility Lenders ”) in respect of its Revolving Bank Facility pursuant to which the
Corporation and the Revolving Bank Facility Lenders have, among other things, agreed that the
Corporation will commence the CBCA Proceedings and pursue the CBCA Transaction, and that
the Corporation and the Revolving Bank Facility Lenders will work to complete an amendment of
the Revolving Bank Facility substantially concurrently with or prior to the implementation of the
CBCA Transaction to allow for the implementation of th e proposed CBCA Transaction, the
implementation of the Subsequent Exchange Transaction and such other matters as may be
agreed by the Corporation and the Revolving Bank Facility Lenders.
CBCA Proceedings
Pursuant to the CBCA Proceedings, Sherritt obtained today an interim order (the “Interim Order”)
issued by the Ontario Superior Court of Justice (Commercial List) (the “ Court”), among other
things, authorizing the holding of a meeting of the Senior Secured Noteholders (the “ Senior
Secured Noteholders’ Meeting ”) and a meeting of the Junior Noteholders (the “ Junior
Noteholders’ Meeting”, and together with the Senior Secured Noteholders’ Meeting, the
“Noteholders’ Meetings”) to consider and vote upon resolutio ns to approve the CBCA Plan to
implement the CBCA Transaction. The Interim Order also granted other relief, including a stay of
proceedings in favour of Sherritt and its subsidiaries in respect of any defaults under the Existing
Notes or any defaults arising as a result of the CBCA Proceedings or steps relating to the CBCA
Transaction.
As noted above, the Subsequent Exchange Transaction does not form part of the CBCA Plan and
is not subject to the CBCA Proceedings or the votes at the Noteholders’ Meetings.
Noteholders’ Meetings, Voting and Early Consent Matters
The Noteholders’ Meetings are scheduled to be held at the offices of Goodmans LLP at Bay
Adelaide Centre – West Tower, 333 Bay Street, Suite 3400, Toronto, Ontario M5H 2S7 on April
4, 2025. Pursuant to the Interim Order, the Senior Secured Noteholders’ Meeting is scheduled to
begin at 10:00 a.m. (Toronto time) and the Junior Noteholders’ Meeting is scheduled to begin at
10:30 a.m. (Toronto time).
The record date (the “Record Date”) for voting at the Noteholders’ Meetings is 5:00 p.m. (Toronto
time) on March 4, 2025.
Noteholders as at the Record Date will be entitled to vote on the CBCA Plan at the applicable
Noteholders’ Meeting based on one vote per C$1,000 of principal amount of the applicable
Existing Notes held by such Noteholder. The Senior Secured Noteholders will vote together as a
single class at the Senior Secured Noteholders’ Meeting and the Junior Noteholders will vote
together as a single class at the Junior Noteholders ’ Meeting, provided that the Interim Order
provides that Sherritt shall have the right to seek, as part of its application for the Final Order (as
defined below) or otherwise, that the Court treat all Noteholders as a single class for the purpose
of voting on the CBCA Plan.
For Senior Secured Noteholders (including, for certainty, the Initial Consenting Noteholders) to
be eligible to receive their applicable early consent consideration, and for Junior Noteholders to
be eligible to receive their applicable early consent consideration, such Noteholders must submit
votes in favour of the CBCA Plan by the Early Consent Deadline of 5:00 p.m. (Toronto time) on
March 25, 2025, as such date may be extended by Sherritt.
The deadline for Noteholders to submit their voting instructions in order to vote on the items to be
considered at the applicable Noteholders’ Meeting is 5:00 p.m. (Toronto time) on April 2, 2025
(the “Voting Deadline”).
Banks, brokers or other intermediaries (each an “ Intermediary”) that hold Existing Notes on a
Noteholder’s behalf may have internal deadlines that require such Noteholders to submit their
votes by an earlier date in advance of the Early Consent Deadline and/or the Voting Deadline, as
applicable, and may have internal requirements for the submission of voting instructions. Such
Noteholders are encouraged to contact their Intermediaries directly to confirm any such internal
deadlines or voting instruction requirements.
To be approved at the Noteholders’ Meetings, the CBCA Plan requires the affirmative vote of at
least 66⅔% of the votes cast at each of the Senior Secured Noteholders’ Meeting and the Junior
Noteholders’ Meeting, provided that the Interim Order provides that Sherritt shall have the right to
seek, as part of the Final Order application or otherwise, that the Court treat all Noteholders as a
single class for the purpose of voting on the CBCA Plan.
In addition, as described above, the Corporation and the Majority Initial Consenting Noteholders
shall have the right to amend the CBCA Plan to remove the Junior Notes Exchange from the
CBCA Plan. If any such amendments are made prior to the Noteholders’ Meetings, such amended
CBCA Plan shall only be required to be approved at the Senior Secured Noteholders’ Meeting as
set forth under the Interim Order, and if any such amendments are made after the Noteholders’
Meetings, such amended CBCA Plan shall not require any further Noteholders’ Meetings or votes