RE: Decent terms outlined below.17 Jun 2026 08:54
Death spiral (or toxic convertible) financing usually has these characteristics:
✅ The lender can convert debt into ordinary shares.
✅ The conversion price is variable, often at a discount (e.g., 80–90%) to the market price at the time of conversion.
✅ If the share price falls, the lender receives more shares.
✅ The lender can sell those shares into the market, pushing the price down further and allowing them to receive even more shares on future conversions.
This creates the "death spiral."
Comparing it with this facility
Positive signs
1. Conversion is into non-voting preference shares
Instead of ordinary shares, the lender receives:
"a new class of non-voting preference shares"
That is very different from a typical toxic convertible, where the lender gets ordinary shares that can immediately be sold into the market.
2. No stated discount
The conversion is based on:
"the average ten-day volume weighted average price"
There is no mention of a discount (such as 10%, 15% or 20%).
If conversion occurs at full VWAP, there is much less incentive for the lender to force the share price lower.
3. Long maturity
The facility runs until July 2030.
Death spiral lenders often convert quickly and repeatedly over a much shorter period.
4. Company can prepay
The company can repay:
cash,
ordinary shares,
preference shares,
and can redeem early for only a 1% fee.
That gives management the ability to avoid an unwanted conversion if circumstances allow.
Things that still deserve attention
There are a couple of features worth watching.
Variable pricing
The conversion price is still linked to the future VWAP.
If BLU's share price were:
20p → fewer preference shares issued.
5p → four times as many preference shares issued.
So there is still an economic incentive for the lender to benefit from a lower price, although it is much weaker than in a discounted ordinary-share convertible.
Preference share rights
The preference shares have:
preferential dividend rights,
preferential liquidation rights.
So while they are non-voting, they could have a senior economic claim compared with ordinary shareholders.
Overall assessment
If I were categorising it:
Feature Present?
Convertible debt ✅ Yes
Converts into ordinary shares ❌ No
Fixed discount to market price ❌ Not disclosed
Continuous conversion mechanism ❌ No indication
Incentive to short the stock ❌ Much weaker
Long-term facility ✅ Yes
Early repayment option ✅ Yes
Conclusion
This looks more like a flexible corporate financing facility with an embedded conversion option than a classic death spiral instrument.
The biggest unknown is the full preference share terms. If those shares are later redeemable, convertible into ordinary shares, or otherwise highly favourable to the lender, the economics could become more dilutive than they first appear.
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