Magnis Energy Technologies (ASX: MNS) shares are down 40% on their relisting today. MNS shares are falling because it looks like the company might actually lose it’s American battery factory. Obviously, it’s a bit premature to say that it will. But that subsidiary, Imperium3 New York, looks like it’s in breach of a loan agreement. That means the loan needs to be refinanced and if the covenant clauses have indeed been breached then where is that going to come from? Sure, as Magnis points out, there’s no guarantee from the parent company. But losing that factory would still not be a good look.
The announcement itself: “The Lender has stated that it may, amongst other matters, seek to enforce the security it has over the assets of the Borrower (and others, including iM3NY and C4V) if a resolution acceptable to the Lender (and ACP) has not been reached by 5pm (New York time) on 14 November 2023. While the Borrower has challenged the Default Notice on various grounds, the Borrower is attempting to resolve the matter with the Lender, including by seeking to procure alternative financing to refinance the Credit Facility”
By the 14th, hunh? That’s not one of those things that’s going to be easy, especially given that two of the forthcoming days are the weekend.
Magnis Energy Technologies share price from Google Finance
Of course, there is that other business inside Magna, the graphite project. But running one business, umm, not so well does cast a light on how the other business lines might be run.
There’s also been considerable concern about some of the stories we’ve been hearing about the Imperium3 facility: “An Indian company purporting to be one of the largest buyers of electric vehicle batteries from Magnis Energy has recorded almost no revenue in the past financial year, according to new accounts filed with regulators. Sukh Energy, which operates in India and Britain, was expected to spend $16.4 million with Magnis’ battery-manufacturing subsidiary, Imperium3 New York, the company told investors in 2021. That figure was forecast to grow to $117 million in 2026.” There seems to be no real business there. A couple of hundred thousand dollars worth of solar panels perhaps. Not a good look.
It’s also possible to think that if that loan in NY does default then the NY state grant to the facility might not come through.
Of course, it is possible that this will all be sorted out. But that’s not quite the way we’d bet at this point. Certainly not without much more clarification we wouldn't.