Electric school bus maker Lion Electric Co. LEV-T bet on transforming an industry ripe for change but now, it finds itself insolvent and desperate for fresh cash.
The Canadian company failed to secure new investor backing ahead of a credit agreements deadline and said Tuesday that it expects to seek creditor protection. It would be the second Quebec electric-vehicle company to do so in the past six months, after Taiga Motors Corp.’s filing in July.
Saint-Jérome, Que.-based Lion was one of the province’s homegrown hopes in the auto industry’s electrification and one of several key players in Premier François Legault’s plan to make Quebec a hub for battery materials and EV development. Lion has more than 2,200 electric vehicles on the road.
But the manufacturer, which went public in 2021 by merging with a special purpose acquisition company, has been caught out by what some observers say was an overly ambitious plan that lacked focus. Now, a court-supervised restructuring looms.
The capital Lion raised in 2021 led the company to make “significant investments that weren’t necessarily critical,” said Louis Hébert, a professor of strategic management at the HEC Montréal business school. “They were very audacious and they took very big risks,” even while their product wasn’t perfectly developed, he said.
Lion had been scrambling to secure more capital from new or existing investors and figure out a way to deal with a debt that now tops $400-million. The company said that in the event it couldn’t raise additional funds or negotiate further concessions with its lenders that it won’t be in compliance with the terms of its credit and loan agreements.
Talks on various options had been continuing with the participation of the Quebec government but did not yield a deal ahead of a Dec. 16 deadline on certain credit agreements with three lenders, led by National Bank of Canada. Lion had also received some relief on conditions tied to a loan from Finalta Capital Inc. and pension fund giant Caisse de dépôt et placement du Québec.
The company said in a statement Tuesday it is in default and expects to enter bankruptcy protection under the Companies’ Creditors Arrangement Act. It said it is in talks with its senior lenders to obtain additional funds under a new debtor-in-possession credit facility.
Lion raised US$200-million through a private placement as part of a special purpose acquisition company deal three years ago and also won access to US$320-million in cash. It used the money to build its main school bus business at a factory attached to its headquarters but also expanded into all-electric truck production and launched an innovation centre and two other manufacturing plants, including one in Joliet, Ill.
As cash was going out the door, revenue was slow to come in. Lion focused on school buses specifically to tap public funding. It’s the market segment in which EV adoption is growing fastest because governments subsidize purchases by school boards and private transporters.
But that also left it at the mercy of government efficiency when those funds get disbursed.
The company said in August that lower deliveries in the second quarter were directly related to the disbursement timing of the U.S. Environmental Protection Agency’s US$5-billion Clean School Bus Program, as well as delays and challenges tied to the granting of subsidies in the Canadian government’s $2.75-billion Zero Emission Transit Fund.
Lion has big-name backing in addition to support from the Quebec and Canadian governments. In all, Quebec has pledged more than $140-million to Lion while Ottawa has lent $50-million, according to a tally from news releases.
Quebec Economy Minister Christine Fréchette had said the province was willing to provide additional financial support to Lion but only if private sector shareholders also participate. “The government wants the company to find investors to ensure its activities continue,” the minister said in an e-mailed statement Tuesday.
The Desmarais family’s Power Energy Corp. is Lion’s biggest shareholder with a 34-per-cent stake, according to data from S&P Capital IQ, while Lion chief executive officer Marc Bedard holds 11.5 per cent. Power Energy has been involved with the company for years, helping it adopt governance and reporting standards and providing a sounding board on strategy.
Other investors in Lion have included the Fonds de solidarité FTQ labour fund, real estate developer Mach Group and the Mirella & Lino Saputo Foundation.