Lithium Americas has taken $150m from a convertible whose conversion floor can fall to 65 cents, and the events that push it there also take the coupon to 15 percent

The cheaper the shares get, the more of them this deal creates.

Lithium Americas issued $150m of subordinated convertible debentures to YA II PN, Ltd. on Thursday, completing the initial closing of a securities purchase agreement signed on 5 August, according to a Form 8-K filed at 16:06 Eastern. A further $25m may follow in delayed closings if the company exercises a put right. The debentures were issued at 100 percent of principal and run five years.

Two conversion prices, and only one of them is fixed

The first is $4.56 a share. The second is 95 percent of the lowest daily volume weighted average price over the five consecutive trading days before conversion, and the holder converts at whichever of the two is lower.

There is a floor under the second one, at $1.63. The filing then says that floor "shall be reduced in certain circumstances, but in no event to less than $0.65". Between the fixed price and the lowest possible floor sits a factor of seven.

The coupon moves on the same triggers

The stated rate is 5 percent. It rises to 7.50 percent in the first two years and to 15 percent after that if specified events occur, and the filing lists three: the stock trading below the floor price for a specified period, the resale registration statement being unavailable for an extended period, and the exchange cap being substantially exhausted.

That cap is 19.99 percent of the shares outstanding at signing, and lifting it requires a shareholder vote under both New York Stock Exchange and Toronto Stock Exchange rules. A separate limit stops the investor holding more than 4.99 percent at any moment, which rises to 9.99 percent on 65 days notice.

What the company cannot do with cash

Repay, mostly. While convertible notes issued to Orion remain outstanding, cash repayments of principal on the new debentures are capped at $35m, are permitted only if Lithium Americas offers to buy back the Orion notes on certain conditions, and must be funded solely from the proceeds of a new equity financing or from cash distributions out of the joint venture with General Motors.

Cash interest is fenced the same way. Lithium Americas has agreed not to pay it on the new debentures unless Orion was paid in cash on the most recent interest payment date. After 181 days the company may redeem, at principal plus a 10 percent premium plus accrued interest, and the investor gets ten trading days to convert instead.