• US$33 million initial investment from Reed management (“Reed”) to be provided to Loop industries as non-dilutive capital to fund Loop’s technology commercialization globally
  • Remaining US$33 million to be invested in a strategic joint venture for commercial roll-out of Infinite Loop™ technology in Europe

Loop Industries, Inc. (Nasdaq: LOOP) (the “Company” or “Loop”), a clean technology company whose mission is to accelerate a circular plastics economy by manufacturing 100% recycled polyethylene terephthalate (“PET”) plastic and polyester fiber, announced today that the Company signed a non-binding Memorandum of Understanding (“MOU”) with Reed, a European investment firm focused on high impact and technology-enabled infrastructure.

Loop and Reed intend to form a strategic long-term partnership through the establishment of a 50/50 joint venture (the “JV”) to commercialize Loop’s technology in Europe. Reed intends to provide financing of €60 million (US$66 million) in non-dilutive capital. Of this amount, US$33 million is to be provided to Loop as non-dilutive capital to fund Loop’s technology commercialization globally. The remaining US$33 million is to be invested in the JV.  

The non-binding MOU is subject to customary due diligence and the fulfillment of certain pre-closing conditions. The transaction is expected to close by the end of March 2024.

Under the terms of the MOU, Reed will provide capital as follows:

  • US$11 million equity investment in the JV to acquire from Loop exclusive rights to co-invest alongside Loop in commercialization projects using Loop’s technology in Europe through the planned joint venture between Loop and Reed;
  • US$22 million loan from the JV to Loop in two equal tranches – first tranche paid at closing and second tranche paid in the following 12 months with both tranches having a 10% PIK rate and 3-year term;
  • US$33 million commitment to cover initial costs to develop projects in Europe, including Loop’s equity contribution to the previously announced JV to construct an Infinite Loop™ plant in Saint-Avold, France;
  • Any subsequent capital injections in the JV will be funded on a 50/50 basis between Reed and Loop.

The planned 50/50 JV will be formed to invest in projects across Europe to commercialize Loop’s technology. This partnership reflects the strong commitment on the part of both Reed and Loop to capitalize on the potential of the rapidly developing European market, with high demand being driven by the introduction of more stringent European plastic recycling regulations and commitments by global brands to achieve their sustainability targets.

The planned partnership with Reed leverages the in-depth industry experience of Reed’s leadership in the development and financing of infrastructure projects throughout Europe as well as their established financing relationships with major institutions. Reed’s experienced investment team is augmented by world-class industry leaders and operating partners with significant expertise in the infrastructure, climate change and investment industries, with a strong network of alliances of large cap companies in the energy, water and waste sectors.

This intended partnership allows for Loop Industries to reduce the funding needs for its equity contributions to support the rollout of an increased number of facilities to be constructed in the European market using the Infinite Loop™ technology. Loop Industries will receive royalty and engineering fees directly from the planned facilities in Europe.

“We are delighted to form a partnership with Reed, which has been a long-standing supporter of Loop’s groundbreaking technology. We believe that this partnership, which combines Reed’s extensive financing relationships and experience in the development of major capital projects with Loop’s innovative technology, will be invaluable in the next stage of Loop’s strategic development, and maximize our opportunity to penetrate the European market as brands adapt to increasingly stringent regulatory requirements for plastic recycling. This model will also allow Loop to maximize shareholder value as Reed will co-invest in the equity for each Infinite Loop™ project in Europe, while Loop receives annual royalty fees and one-time engineering fees from each facility. In addition, the structure of the current planned financing will be accretive to shareholder value by minimizing initial equity dilution.”

– Daniel Solomita, Founder and CEO of Loop Industries

Source: Loop Industries

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