Atlantic Sapphire - A Convertible Loan That is Really a Change of Control.

A couple of years ago, I did some work for a start-up that was forced to secure a convertible loan from an existing investor. The terms of that loan were scandalous – extremely high interest rates and a conversion into shares that penalized everyone else. So I thought it might be interesting for my dear readers and cathartic for me to have a closer look at the terms of this loan.

If you’ve read the headlines about Atlantic Sapphire’s upcoming extraordinary general meeting (EGM), you’ll have seen references to a “USD 31–35m convertible loan.” That description is technically correct — but it misses the bigger picture.

Buried in the EGM documents is the reality that this isn’t a USD 31–35m deal at all. Once you include the rolled-in bridge loan, a 15% investor fee, and the conversion of Condire’s existing USD 20m loan, the actual principal that can convert into equity is closer to USD 53–59m. On top of that, the loan carries 10% payment-in-kind (PIK) interest that accrues into the balance, meaning the amount that converts will grow substantially over five years.

How the Terms Work

- Conversion price: Fixed at NOK 10 per share (post capital reduction to NOK 0.50 par).
- PIK interest: 10% per year, compounding.
- Bonus shares: If Atlantic Sapphire later raises more than USD 100m in equity, lenders converting within 20 days get one bonus share for every three they receive.
- Pre-emptive rights: Waived. Only selected investors are invited in.

In plain English: the investors providing this financing aren’t just lending; they’ve secured a path to take over most of the company’s equity.

What It Means for Shareholders

Atlantic Sapphire - current distribution of ownership

At present, Nordlaks Holding (16.1%) and Strawberry Capital (9.1%) together hold about 25% of Atlantic Sapphire. Condire, the third anchor, is less visible in the register but is rolling its prior USD 20m loan into the deal.

After conversion of the new convertible loan:
- Participating investors (Nordlaks, Strawberry, Condire) will own around 73–78% of the company.
- All other shareholders combined will fall from 100% ownership to just 22–27%.

That’s not just dilution — it’s effectively a transfer of control. And unlike a traditional takeover, existing shareholders don’t get a premium or a chance to participate on equal terms - at least not that I am aware of.

Atlantic Sapphire - expected distribution of ownership post equity conversion of loan amounts

Atlantic Sapphire - expected share distribution post loan conversion and bonus for successful equity raise.

The Bigger Story

The board defends the structure as “the most viable financing option available under current market conditions.” Maybe that’s true — distressed companies often have little choice but to accept what’s on offer. But it’s important to be clear about what’s really happening here.

This isn’t a routine refinancing. It’s a deal that hands control of Atlantic Sapphire to three investors, at terms that lock in heavy dilution for everyone else.

The headlines say “USD 31–35m loan.” The fine print says “change of control.”