Sigma Lithium Corp (TSX-V:SGML, NASDAQ:SGML, ASX:SAU) has priced an upsized US$125 million convertible bond offering to refinance its senior secured debt with Synergy Capital and reduce borrowing costs.
The offering was increased by 25% from the US$100 million initially launched, reflecting demand for the five-year senior unsecured bonds, which carry a fixed coupon of 7%.
The bonds will replace Sigma’s floating-rate Synergy Capital debt, which carries an interest rate of 11.45%, or SOFR plus 6.95%, and is due in June 2027.
The refinancing extends the company’s debt maturity profile to 2031 and reduces short-term debt by approximately 80%. Synergy Capital’s security will be released upon repayment, allowing Sigma to replace secured borrowing with unsecured financing.
The bonds are convertible into CHESS Depositary Interests, each representing one common share, at a conversion price of US$6.51. That represents a 25% premium to Sigma’s Nasdaq closing price of US$5.21 on November 2.
Conversion will not be permitted during the first 12 months following closing, except in limited circumstances.
The transaction marks Sigma’s first convertible bond issuance and follows two years of balance sheet strengthening.
The company has repaid more than US$90 million in debt since the second quarter of 2024 through cash generation, reducing total debt by approximately 40% to US$125 million as of October 21.
Sigma has been self-funded since July 2023 and has not issued equity since 2021.
Under the bond terms, holders may require redemption at 100% of principal at the end of the third year, around November 2029. Interest will be payable quarterly in arrears, while the conversion price will be adjusted for dividends paid by the company.
Any proceeds remaining after repayment of the Synergy Capital debt will be directed toward growth capital expenditure and general corporate purposes.
The offering is expected to close on or about November 16.
Sigma has also applied to list the bonds on the Vienna MTF.