Enersense plans to amend its convertible notes into hybrid convertible bond

Translation: Original published in Finnish on 11/18/2025 at 7:25 am EET.

The aim of the arrangement is to strengthen Enersense's balance sheet, prolong its maturity profile and support the refinancing of other debt financing facilities. The company's financial restructuring was quite expected in the near future, and we consider the terms of the arrangement to be reasonably neutral in the current situation. The proposed arrangement does not impact our view of the company.

Financing arrangement would strengthen the company's balance sheet position

Enersense announced on Monday its plan to restructure financing. Therefore, the company is commencing a consent solicitation process regarding its 26 MEUR convertible notes due in 2027. The company proposes amending the notes into a subordinated hybrid convertible bond, which would strengthen the balance sheet because hybrid bonds are treated as equity under IFRS standards. In connection with this, the company has received credit commitments for a new 16 MEUR term loan and an 8 MEUR revolving credit facility, both maturing in 2028. The proceeds received through the new financing arrangements will be utilized to refinance existing borrowings and repay the payment arrangement with the tax administration (9.1 MEUR remaining at the end of Q3’25). Completion of the arrangements is contingent on approval of the amendments to the terms and conditions of the convertible notes.

Convertible note terms becoming slightly more attractive to debt investors

According to the proposal, the terms of the convertible notes would be revised to make them more appealing to debt investors in exchange for subordinating the loan. The loan's fixed coupon rate would increase from the current 7.0% to 8.0% on January 15, 2026 and then become variable (3-month Euribor + 10.708% margin) on January 15, 2029. However, we generally assume that the company will negotiate refinancing by 2028 at the latest. In addition, the initial conversion price of the loan would be reduced from EUR 8.00 to EUR 7.00. Nevertheless, the new conversion price would represent a significant premium (approximately 64%) compared to yesterday's closing price (EUR 4.29), for example. Full conversion of the convertible notes would result in the issuance of approximately 3.7 million new shares, creating a dilution effect of about 18.4%. The company did not disclose the specific terms and conditions of the credit commitments in its press release, however.

The proposal is very likely to be approved at this stage, as approximately 80% of noteholders are expected to support it. The meeting of noteholders will be held on December 4, 2025. After the terms are approved, Enersense may also consider the issuance of up to 4 MEUR of additional convertible capital notes to selected investors as a tap issuance under the amended terms and conditions of the notes. Proceeds from the additional convertible capital notes would be used for general business purposes.

An expected step, but slightly earlier than we expected

The financial restructuring was expected given the company's debt maturity profile (a 5 MEUR senior loan maturing on March 31, 2026, and convertible notes maturing in January 2027). However, the restructuring of the convertible notes in particular occurred slightly earlier than we anticipated. We believe the positive aspect of the plan as a whole is that it extends financing maturity, and if implemented, we think the arrangement will secure Enersense's financing needs for the coming years. At the same time, converting the convertible notes into a hybrid convertible bond will strengthen the company's equity ratio and thus improve its balance sheet position. Previously, we assessed (e.g., in our extensive report) that the company was seeking purely debt financing, but we could not rule out the possibility of partial equity financing either, as is now being planned.

On the other hand, given the development (e.g., in connection with the Value Uplift program) of the company's balance sheet position (equity ratio at the end of Q3'25: 23%), we believe that it would have been difficult to obtain purely debt financing in the size range of the new financing package. We also consider it possible that the conditional credit commitments now obtained required strengthening the balance sheet in terms of equity. Considering the overall situation, we conclude that converting the convertible notes into a hybrid convertible bond was one of the relatively simplest ways to strengthen the financial position and extend the loan's maturity.

Similarly, we consider changes to the terms of the notes (higher interest rate, lower conversion price) to be a fairly logical way to compensate investors for the change in the loan's status. One slightly negative aspect of the new financing package that we see is the continued risk of dilution of the share capital in the future, as we thought it possible that this could have been avoided in connection with the refinancing. On the other hand, however, the reduced conversion price is significantly higher than the current share price, which means that the conversion of noteholders' loans requires successful implementation of the strategy and clear value creation by the company. We therefore consider the terms of the financing package to be very consistent with those of the current shareholders. In turn, we find the slightly rising cost of financing acceptable, given the financing's form, even though it is not cheap.

If implemented, however, the financing arrangement will slightly increase the company's annual financing costs, at least with regard to the hybrid bond. Nevertheless, we believe that the arrangement as a whole clarifies the company's financial position and also eliminates the risk of raising equity financing, though we considered this highly unlikely. Considering the implementation of the strategy, which is still in relatively early stages, and the turnaround in earnings, we believe the new package can be viewed as somewhat neutral in the current situation. We will revisit our estimates once the refinancing process is complete, but we preliminarily estimate that the changes will be limited, except for the capital structure.