MONTREAL — Seized with a liquidity crisis, the Lion Electric Co. said Tuesday it expects to seek protection from creditors under the Companies’ Creditors Arrangement Act.
In a news release, the electric school bus maker says it has defaulted on its debt and is in talks with its senior lenders to obtain additional funds for a new debtor-in-possession credit facility.
It says it plans to restructure its business and pursue a formal sales and investment solicitation process.
The company temporarily laid off 400 employees and shut down production at its Illinois plant earlier this month after getting a two-week reprieve from its lenders to explore its alternatives. It said at that time that its 300 remaining employees would focus on bus manufacturing, sales and delivery.
Lion Electric had until Monday to reach agreements to repay two loans: one from a syndicate of banks, and the other from Finalta Capital and Quebec’s pension fund manager — Caisse de dépôt et placement du Québec.
The deadline for these two loans had been extended from Nov. 30 to Dec. 16 to give Lion more time to find funds, but the company confirmed on Tuesday that it had failed to do so.
However, the company said it is still in negotiations “with its senior lenders” to secure additional funds.
Trading in Lion Electric shares on the Toronto Stock Exchange was halted for failure to maintain exchange requirements.
“It is anticipated that the trading thereof will continue to be halted until a review is undertaken by the TSX and the NYSE regarding the suitability of the company for listing” on the two exchanges, Lion Electric said Tuesday.
In recent years, the company has also received financial support, notably loans, from the governments of Quebec and Canada, and from two major investment funds tied to labour groups in the province.
Lion Electric management has often attributed its poor financial performance in recent quarters to delays in the Canadian government’s zero-emission school bus subsidy program.
In November, the Quebec-based manufacturer warned that it risked running out of money to continue operations if it did not find alternative sources of funding. To replenish its coffers, Lion mentioned the possibility of selling some of its assets and even selling the company.
In early December, the company announced it had reached an agreement with Montreal’s airport authority to sell its innovation centre in Mirabel, Que. The $50 million from that transaction was intended to help the manufacturer partially repay loans.
