Loop Industries Announces Important Milestone Towards Completing the Previously Announced Reed Management Financing Package and Partnership

Rhea-AI Summary

Loop Industries (NASDAQ:LOOP) has announced a significant milestone in its partnership with Reed Management SAS. Societe Generale has agreed to acquire 75% of Reed, potentially securing funding for Reed's planned investments, including a €35 million financing package for Loop. This transaction, subject to closing conditions, would provide Loop with:

1. A €10 million investment in a Convertible Preferred Security with a 13% PIK dividend rate and 5-year term, convertible to Loop stock at $4.75 per share.

2. A €25 million loan in two equal tranches with a 13% PIK interest rate and 3-year term.

This development is important for Loop's global and European deployment opportunities, particularly for the Infinite Loop™ India facility.

Positive

• Societe Generale's acquisition of 75% of Reed Management SAS, potentially securing €35 million in financing for Loop
• €10 million investment in Convertible Preferred Security with favorable terms
• €25 million loan to support global and European deployment opportunities
• Potential funding for Loop's equity commitment in the Infinite Loop™ India facility
• Partnership with a major European financial institution enhancing Loop's future positioning

Negative

• The transaction is still subject to closing conditions and regulatory approval
• High 13% PIK dividend rate on the Convertible Preferred Security
• Short-term 3-year loan for the €25 million financing

Financial Analyst

Loop Industries' announcement marks a significant milestone in securing funding for its expansion plans, particularly in Europe and India. The partnership with Reed Management, now backed by Societe Generale's acquisition, presents a robust financial structure for Loop's growth strategy.

The €35 million financing package through the JV partnership is a substantial boost for Loop's capital needs. Breaking it down:

• A €10 million Convertible Preferred Security with a 13% PIK dividend rate and potential conversion at $4.75 per share
• A €25 million loan in two tranches, also at 13% PIK interest rate

This financing structure provides Loop with immediate capital while offering Reed (and by extension, Societe Generale) potential equity upside. The high interest rates reflect the risk profile of Loop's venture but also demonstrate Reed's confidence in Loop's technology and market potential.

Importantly, this deal secures funding for Loop's equity commitment in the Infinite Loop™ India facility, a key growth driver. The additional capital for operating expenses will provide a runway for Loop to reach facility startup, a critical milestone for revenue generation.

However, investors should note that while this funding is significant, Loop will likely need additional capital for full-scale commercialization. The company's ability to secure government and other financing will be important for long-term success.

Tech Expert

Loop Industries' recycled PET technology represents a significant advancement in the circular plastics economy. The partnership with Reed, now bolstered by Societe Generale's involvement, provides a strong foundation for scaling this technology across Europe and into India.

The Infinite Loop™ facility planned for India is particularly noteworthy. India, as one of the world's largest plastic consumers, presents an enormous market opportunity for Loop's recycling technology. Successfully deploying this facility could serve as a proof of concept for further global expansion.

However, it's important to understand that scaling chemical recycling technologies like Loop's often faces challenges:

• Feedstock quality and consistency
• Energy efficiency of the process
• Competition from mechanical recycling and virgin plastic production

Loop's ability to overcome these hurdles will be critical for long-term success. The backing of major financial institutions like Societe Generale suggests confidence in Loop's technological edge, but investors should closely monitor operational metrics as facilities come online.

Furthermore, the evolving regulatory landscape around plastic recycling, particularly in Europe, could significantly impact Loop's growth trajectory. Favorable policies could accelerate adoption, while stringent regulations might pose challenges.

Market Research Analyst

The partnership between Loop Industries, Reed Management and now Societe Generale signifies a growing institutional interest in circular economy solutions, particularly in plastic recycling. This trend is driven by increasing consumer awareness, corporate sustainability commitments and tightening regulations on single-use plastics.

Loop's focus on 100% recycled PET and polyester fiber positions it well in a market projected to grow significantly. The global recycled plastics market is expected to reach $72.6 billion by 2027, with a CAGR of 8.5% from 2020 to 2027.

Key market drivers include:

• Stringent government regulations promoting recycling
• Increasing adoption of recycled plastics by major brands
• Growing consumer preference for sustainable products

Loop's expansion into India is particularly strategic. India's plastic consumption is expected to double by 2040 and the government has set ambitious recycling targets. This presents a substantial opportunity for Loop's technology.

However, investors should be aware of potential market risks:

• Volatility in oil prices affecting competitiveness with virgin plastics
• Emergence of alternative recycling technologies or materials
• Potential oversupply in the recycled PET market as more capacity comes online

Overall, the market outlook for Loop's technology appears positive, but success will depend on efficient execution and adaptability to market dynamics.

• Societe Generale to acquire 75% of Reed Management SAS ("Reed")

• At closing this would secure funding for Reed's planned investments including €35 million financing package through JV partnership with Loop

MONTREAL, QC / ACCESSWIRE / July 31, 2024 / Loop Industries, Inc. (NASDAQ:LOOP) (the "Company," "Loop," "we," "us," or "our"), a clean technology company whose mission is to accelerate a circular plastics economy by manufacturing 100% recycled polyethylene terephthalate ("PET") plastic and polyester fiber, today provided an update regarding the Company's joint venture ("JV") partnership and financing agreement with Reed. This morning, Reed and Societe Generale announced that Societe Generale has agreed to acquire 75% of Reed and provide funding for Reed initially amounting to €250 million, which can be further increased to €350 million. This transaction, which is subject to customary closing conditions including regulatory approval, would secure Reed's funding for its planned investments, including its previously announced JV partnership for the European deployment of Loop's technology and a tiered financing package for Loop as disclosed in the agreement between Reed and Loop announced on May 30^th, 2024.

Under the terms of the agreement between Loop and Reed, Reed would provide capital as follows:

• €10M investment in a Convertible Preferred Security to be issued by Loop, which contains a 13% PIK dividend rate and 5-year term, which may convert into Loop stock at $4.75 per share or redeemed in cash

• €25M loan to Loop in two equal tranches - first tranche to support global deployment opportunities paid at closing and second tranche to support European deployment opportunities paid in the following 12 months with both tranches having a 13% PIK interest rate and 3-year term

The Reed announcement today is a significant step towards implementing Loop's transaction with Reed. Loop expects to fulfill the remaining closing condition of the transaction within the timeframe for the closing of the transaction between Reed and Societe Generale. Loop is progressing well in discussions to obtain government and other financing.

To view the press release issued by Societe Generale, please click on the following link: https://www.societegenerale.com/en/news/press-release/transition-investment-reed-acquisition-project

Julien Touati, CEO of Reed, commented saying: "We are extremely proud of this milestone in our development and look forward to continuing to cooperate with Loop in the implementation of our partnership in view of supporting Loop's journey in the years to come".

Daniel Solomita, Founder and CEO of Loop Industries, commented saying: "We are pleased that Societe Generale, one of Europe's largest financial institutions, is becoming a major investor in Reed. Having Societe Generale, Reed and Julien as long-term partners with Loop will enhance our positioning for the future as we deploy our technology in India, Europe and beyond. This funding will provide the majority of the capital required for Loop's equity commitment for the Infinite Loop™ India facility, as well as for Loop's operating expenses prior to startup of the facility."

About Loop Industries
Loop Industries is a technology company whose mission is to accelerate the world's shift toward sustainable PET plastic and polyester fiber and away from our dependence on fossil fuels. Loop Industries owns patented and proprietary technology that depolymerizes no and low-value waste PET plastic and polyester fiber, including plastic bottles and packaging, carpets and textiles of any color, transparency or condition and even ocean plastics that have been degraded by the sun and salt, to its base building blocks (monomers). The monomers are filtered, purified and polymerized to create virgin-quality Loop™ branded PET resin suitable for use in food-grade packaging and polyester fiber, thus enabling our customers to meet their sustainability objectives. Loop™ PET plastic and polyester fiber can be recycled infinitely without degradation of quality, successfully closing the plastic loop. Loop Industries is contributing to the global movement towards a circular economy by reducing plastic waste and recovering waste plastic for a sustainable future.

Common shares of the Company are listed on the NASDAQ Global Market under the symbol "LOOP."

For more information, please visit www.loopindustries.com. Follow Loop on Twitter: @loopindustries, Instagram: loopindustries, Facebook: Loop Industries and LinkedIn: Loop Industries

Forward-Looking Statements
This news release contains "forward-looking statements" as defined in the U.S. Private Securities Litigation Reform Act of 1995. Such statements may be preceded by the words "intends," "may," "will," "plans," "expects," "anticipates," "should," "could," "projects," "predicts," "estimates," "aims," "believes," "hopes," "potential" or "continue," the negative of such terms or similar words. These forward-looking statements include, without limitation, statements about Loop's market opportunity, its strategies, ability to improve and expand its capabilities, competition, expected activities and expenditures as Loop pursues its business plan, the adequacy of its available cash resources, regulatory compliance, plans for future growth and future operations, the size of Loop's addressable market, market trends, and the effectiveness of Loop's internal control over financial reporting. Forward-looking statements are not guarantees of future performance, are based on certain assumptions and are subject to various known and unknown risks and uncertainties, many of which are beyond Loop's control, and cannot be predicted or quantified and consequently, actual results may differ materially from those expressed or implied by such forward-looking statements. Such risks and uncertainties include, without limitation, risks and uncertainties associated with among other things: (i) commercialization of our technology and products, (ii) our status of relationship with partners, (iii) development and protection of our intellectual property and products, (iv) industry competition, (v) our need for and ability to obtain additional funding relative to our current and future financial commitments, (vi) engineering, contracting, and building our manufacturing facilities, (vii) our ability to scale, manufacture, and sell our products in order to generate revenues, (viii) our proposed business model and our ability to execute thereon, (ix) the ability to obtain the necessary approvals or satisfy any closing conditions in respect of any of our proposed partnerships, (x) our joint venture projects and our ability to recover certain expenditures in connection therewith, (xi) adverse effects on the Company's business and operations as a result of increased regulatory, media, or financial reporting scrutiny, practices, rumors, or otherwise, (xii) disease epidemics and other health-related concerns and crises, which could result in reduced access to capital markets, supply chain disruptions and scrutiny, embargoing of goods produced in affected areas, government-imposed mandatory business closures and any resulting furloughs of our employees, government employment subsidy programs, travel restrictions or the like to prevent the spread of disease, or market or other changes that could result in non-cash impairments of our intangible assets, and property, plant and equipment, (xiii) the effect of the continuing worldwide macroeconomic uncertainty and its impacts, including inflation, market volatility and fluctuations in foreign currency exchange and interest rates, (xiv) the outcome of any U.S. Securities and Exchange Commission ("SEC") investigations or class action litigation filed against us, (xv) our ability to hire and/or retain qualified employees and consultants, (xvi) other events or circumstances over which we have little or no control, and (xvii) other factors discussed in Loop's Annual Report on Form 10-K for the fiscal year ended February 29, 2024 filed with the SEC and in Loop's subsequent filings with the SEC. More detailed information about Loop and the risk factors that may affect the realization of forward-looking statements is set forth in Loop's filings with the SEC. Investors and security holders are urged to read these documents free of charge on the SEC's web site at http://www.sec.gov. Loop assumes no obligation to publicly update or revise its forward-looking statements as a result of new information, future events or otherwise.

For More Information:
Investor Relations:
Kevin C. O'Dowd, Investor Relations
Loop Industries, Inc.
+1 617-755-4602
kodowd@loopindustries.com

Media Inquiries:
Andrea Kostiuk, VP Marketing & Communications
Loop Industries, Inc.
+1 (450) 951-8555
akostiuk@loopindustries.com

SOURCE: Loop Industries, Inc.

View the original press release on accesswire.com

FAQ

What is the significance of Societe Generale's acquisition of Reed Management for Loop Industries (LOOP)?

Societe Generale's acquisition of 75% of Reed Management is significant for Loop Industries (LOOP) as it potentially secures a €35 million financing package for Loop, supporting its global and European deployment opportunities, including funding for the Infinite Loop™ India facility.

What are the terms of the €10 million Convertible Preferred Security investment in Loop Industries (LOOP)?

The €10 million Convertible Preferred Security investment in Loop Industries (LOOP) has a 13% PIK dividend rate, a 5-year term, and can be converted into Loop stock at $4.75 per share or redeemed in cash.

How will the €25 million loan to Loop Industries (LOOP) be structured?

The €25 million loan to Loop Industries (LOOP) will be provided in two equal tranches: the first to support global deployment opportunities paid at closing, and the second to support European deployment opportunities paid in the following 12 months. Both tranches have a 13% PIK interest rate and a 3-year term.

What is the purpose of the financing package for Loop Industries (LOOP)?

The financing package for Loop Industries (LOOP) is intended to provide capital for its equity commitment in the Infinite Loop™ India facility, support global and European deployment opportunities, and cover operating expenses prior to the facility's startup.