Loop Industries announces memorandum of understanding for USD 66 million of non-dilutive financing from Reed Management
Loop Industries, Inc., a clean technology company whose mission is to accelerate a circular plastics economy by manufacturing 100% recycled PET plastic and polyester fiber, announced this week that it had 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 to commercialize Loop’s technology in Europe. Reed intends to provide financing of USD 66 million in non-dilutive capital. Of this amount, USD 33 million is to be provided to Loop as non-dilutive capital to fund Loop’s technology commercialisation globally. The remaining USD 33 million is to be invested in the joint venture
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:
- USD 11 million equity investment in the joint venture to acquire from Loop exclusive rights to co-invest alongside Loop in commercialisation projects using Loop’s technology in Europe through the planned joint venture between Loop and Reed;
- USD 22 million loan from the joint venture 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;
- USD 33 million commitment to cover initial costs to develop projects in Europe, including Loop’s equity contribution to the previously announced joint venture to construct an Infinite Loop plant in Saint-Avold, France;
- Any subsequent capital injections in the joint venture will be funded on a 50/50 basis between Reed and Loop.
The planned 50/50 joint venture will be formed to invest in projects across Europe to commercialise Loop’s technology. This partnership reflects the strong commitment on the part of both Reed and Loop to capitalise 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.
Daniel Solomita, Founder and CEO of Loop Industries, commented “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.”
