MONTREAL - The Lion Electric Company (NYSE: LEV) (TSX: LEV), a manufacturer of all-electric urban vehicles, has amended its senior credit facilities to extend the suspension of certain financial covenants and the maturity dates of its debt instruments. The company announced the changes as part of its ongoing efforts to improve liquidity and strengthen its financial position.
The amendments to Lion's senior revolving credit agreement, which involve a syndicate of lenders including the National Bank of Canada (OTC:NTIOF), Bank of Montreal, and Federation des Caisses Desjardins du Quebec, extend the suspension of the tangible net worth test and the springing fixed charge coverage ratio from September 30, 2024, to November 15, 2024. During this period, known as the covenant relief period, any excess cash must be used for repayment of the revolving credit agreement. Lion must also maintain a minimum liquidity of C$15 million, with certain exceptions, and adhere to enhanced reporting obligations and limitations on the use of advances.
The company also extended the maturity date of its loan agreement with Finalta Capital and Caisse de dépôt et placement du Quebec from November 6, 2024, to November 30, 2024. The terms of the liquidity requirement under this loan will align with those of the revolving credit agreement during the covenant relief period.
These strategic financial moves come as Lion Electric continues to evaluate various opportunities to refinance its debt, sell assets, or explore other alternatives to bolster its financial standing. The company's shares are traded on the New York Stock Exchange and the Toronto Stock Exchange under the symbol LEV.
Lion Electric is known for its zero-emission commercial urban trucks and electric school buses. The company's commitment to innovation in electric transportation includes designing and manufacturing key vehicle components, such as chassis, battery packs, truck cabins, and bus bodies.
The information in this article is based on a press release statement from The Lion Electric Company.
In other recent news, Lion Electric has faced considerable challenges in its second quarter of 2024. Bureaucratic delays and slower-than-expected adoption rates have affected the electric vehicle manufacturer's performance, leading to a shift in focus towards liquidity preservation. These developments have prompted analyst firms DA Davidson and BMO Capital Markets to downgrade Lion Electric's stock and lower their price targets.
DA Davidson downgraded the stock from Buy to Neutral and reduced the price target to $1.00, citing concerns over the company's significant capacity and insufficient backlogs. Similarly, BMO Capital Markets lowered its price target to $0.80, maintaining a Market Perform rating due to the company's challenging liquidity position.
In response to these difficulties, Lion Electric has implemented several measures, including inventory reductions, layoffs, and operational footprint reduction. The company's second-quarter earnings showed revenues of $30 million and a negative gross margin of $15 million. Despite these challenges, Lion Electric maintains a solid order book with 1,994 vehicles valued at approximately $475 million.
The company is actively working on cost reduction and operational adjustments to improve its financial standing. With strategies in place to align costs with current industry volumes, Lion Electric is preparing for a potential market recovery in 2025. The company's efforts to manage its liquidity and reduce costs reflect its commitment to navigating the current challenges and positioning itself for future opportunities in the electric vehicle market.
InvestingPro Insights
Lion Electric's recent amendments to its credit facilities reflect the company's ongoing financial challenges, as highlighted by several InvestingPro metrics and tips. The company's market capitalization stands at a modest $153.89 million, indicating its relatively small size in the electric vehicle market.
InvestingPro data shows that Lion Electric is currently operating at a loss, with a negative gross profit of $30.04 million for the last twelve months as of Q2 2024. This aligns with an InvestingPro Tip that the company "suffers from weak gross profit margins," which is evident in the -13.26% gross profit margin for the same period.
The company's financial strain is further underscored by another InvestingPro Tip stating that Lion Electric is "quickly burning through cash." This is particularly relevant to the article's focus on the company's efforts to improve liquidity and strengthen its financial position through the amendment of credit facilities.
Additionally, the InvestingPro Tip that Lion Electric "operates with a significant debt burden" provides context for why the company is seeking to extend the suspension of financial covenants and maturity dates of its debt instruments. This debt situation, combined with the tip that the company "may have trouble making interest payments on debt," explains the urgency behind Lion's strategic financial moves.
The stock's performance has been notably weak, with InvestingPro data showing a one-year price total return of -64.46% as of the latest data. This significant decline aligns with the InvestingPro Tip that the "price has fallen significantly over the last year," reflecting investor concerns about the company's financial health.
For investors seeking a more comprehensive analysis, InvestingPro offers 15 additional tips for Lion Electric, providing a deeper understanding of the company's financial situation and market position.
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