SCHEDULE 13D: SPP Credit Advisors Seizes 42% Stake in Atlantic International Corp. Following Loan Default

Sentiment:

Schedule 13D Filing 15 May 2025 11:17 PM

📋All filings for Atlantic International CORP

SPP Credit Advisors, LLC has acquired a 42% beneficial ownership stake in Atlantic International Corp., including shares and a convertible note, through a Uniform Commercial Code sale after exercising post-default remedies on a loan to IDC Technologies, Inc.

Capital raiseThe Convertible Promissory Note's maturity date is triggered by the earlier of March 31, 2027, or the completion of debt or equity offerings by Atlantic International Corp. in which it receives gross proceeds of at least $40,000,000. This implies a potential future capital raise by Atlantic could accelerate the note's maturity.

Worse than expectedThe acquisition of a significant stake by a lender (SPP Credit Advisors) is a direct consequence of a loan default by IDC Technologies, Inc., which held shares and a convertible note from Atlantic International Corp. This indicates financial distress for IDC and potentially underlying issues for Atlantic.The Convertible Promissory Note imposes substantial restrictions on Atlantic International Corp.'s financial and operational autonomy, including limitations on dividends, asset sales, and future financing, which can hinder its growth and flexibility.The stated intention of SPP Credit Advisors to dispose of shares over the next several months suggests potential selling pressure on Atlantic International Corp.'s stock.

Summary

SPP Credit Advisors, LLC and C. Todd Kumble (Reporting Persons) have acquired 26,358,926 shares, representing 42% of Atlantic International Corp.'s common stock.
This acquisition occurred on April 28, 2025, through a Uniform Commercial Code public sale proceeding, following the exercise of post-default remedies on a loan to IDC Technologies, Inc.
The acquired assets include 21,983,926 direct shares of Atlantic International Corp. and a Convertible Promissory Note with a principal amount of $35,000,000, which is convertible into an additional 4,375,000 shares.
As of April 28, 2025, the outstanding amounts owed under the Loan Agreement by IDC Technologies, Inc. and related borrowers to SPP Credit Advisors totaled $47,063,404.46, including principal, interest, and fees.
The Loan Agreement was amended and restated on April 29, 2025, with an aggregate outstanding principal of $37,897,672.06, accrued unpaid interest of $2,546,232.40, an Exit Fee of $5,119,500, and costs and expenses of $1,500,000.
The Loan Agreement bears interest at 5.00% per annum and has a maturity date of March 31, 2027.
The Convertible Promissory Note, issued by Atlantic International Corp. to IDC Technologies, Inc. (now held by SPP), has a principal amount of $35,000,000 and matures on the earlier of March 31, 2027, or completion of Atlantic debt/equity offerings raising at least $40,000,000.

Sentiment

Score: 3

Explanation: The sentiment is negative due to the underlying cause of the transaction being a loan default, indicating financial distress for the original borrower (IDC) and imposing significant restrictions and potential selling pressure on Atlantic International Corp. The acquisition by the lender is a recovery action, not a strategic investment in growth for Atlantic.

Positives

For SPP Credit Advisors: Successful recovery of collateral and significant equity stake in Atlantic International Corp. following a loan default, providing potential for future monetization.
For Atlantic International Corp.: The resolution of the defaulted loan situation, albeit through a change in major shareholder, could bring clarity to its capital structure.

Negatives

For IDC Technologies, Inc.: Loss of significant assets (Atlantic shares and Convertible Note) due to default on a loan, indicating financial distress.
For Atlantic International Corp.: The company's shares and a convertible note were part of collateral seized due to a default by a related entity (IDC), which could signal underlying financial vulnerabilities or operational challenges.
The Convertible Promissory Note imposes significant restrictions on Atlantic International Corp.'s financial and operational flexibility, including limitations on dividends, business changes, asset sales, and future borrowing arrangements.

Risks

Liquidation Risk: SPP Credit Advisors explicitly states its expectation to dispose of as many shares as possible over the next several months, which could put downward pressure on Atlantic International Corp.'s stock price.
Financial Restrictions: Atlantic International Corp. is subject to strict covenants under the Convertible Promissory Note, limiting its ability to pay dividends, change business nature, sell material assets, engage in certain financing activities (e.g., factoring, high APR loans), or repurchase its own stock without SPP's consent.
Delisting Risk: An Event of Default under the Convertible Promissory Note includes Atlantic's failure to maintain its Nasdaq listing or listing on any other national securities exchange.
Change of Control Risk: A Change of Control in Atlantic International Corp. is an Event of Default under the Convertible Promissory Note, triggering acceleration of repayment.
Debt Burden: The significant outstanding debt and associated fees ($47,063,404.46 owed by Borrowers to SPP as of April 28, 2025) indicate a substantial financial obligation for the entities involved.

Future Outlook

The Reporting Person, SPP Credit Advisors, LLC, acquired the shares and convertible note as a result of exercising post-default collateral remedies. While no plans for extraordinary corporate transactions or management changes are currently in place, SPP Credit Advisors expects to dispose of as many shares as possible over the next several months, based on market conditions and other business considerations.

Management Comments

The Reporting Person may dispose of the shares or Convertible Notes from time to time, based on market conditions and other business considerations, and expects to dispose of as many shares as possible under applicable limitations over the next several months.

Industry Context

This filing highlights a common scenario in distressed debt investing, where a lender (SPP Credit Advisors) converts a defaulted loan into equity and control through a Uniform Commercial Code sale. This action reflects the lender's strategy to recover value from a non-performing asset, potentially indicating broader challenges within the borrower's (IDC Technologies, Inc.) financial health or the specific sector it operates in. For Atlantic International Corp., it signifies a significant change in its ownership structure and introduces new financial covenants and potential liquidity events driven by the new major shareholder's exit strategy.

Comparison to Industry Standards

Corporate Governance

Change Type	Description	Effective Date	Impact Assessment
Board Observer Rights	SPP Credit Advisors, as Agent, has the right to designate an observer to the board of directors or equivalent governing body of IDC Technologies, Inc. and Lyneer Investments, LLC. The observer is entitled to notice, materials, and attendance at all board meetings, which must occur at least twice per year.	2025-04-29	Increases oversight and influence of SPP Credit Advisors over IDC and Lyneer Investments, potentially impacting strategic decisions and financial management of these entities, which are related to Atlantic International Corp. through the acquired shares and note.
Covenants on Issuer Operations	The Convertible Promissory Note imposes significant restrictions on Atlantic International Corp.'s operations, including limitations on dividend payments (other than stock dividends), changes in business nature, sale/divestiture of material assets or subsidiaries (outside ordinary course), acceptance of certain financing types (e.g., Merchant-Cash-Advances, factoring, high APR loans), and repurchase of its own stock, all requiring SPP's consent.	2025-04-28	Significantly restricts Atlantic International Corp.'s financial and strategic flexibility, potentially hindering its ability to pursue growth initiatives, return capital to shareholders, or manage its capital structure without the consent of its new major shareholder.

Related Party Transactions

The core transaction involves SPP Credit Advisors acquiring assets (Atlantic shares and a Convertible Note) from IDC Technologies, Inc., which was the original borrower and payee of the note from Atlantic International Corp. This highlights a pre-existing relationship and financial entanglement between IDC and Atlantic, and now SPP.
The Convertible Promissory Note was issued by Atlantic International Corp. to IDC Technologies, Inc. pursuant to an Amended and Restated Agreement and Plan of Reorganization (Merger Agreement) dated May 29, 2023, and subsequently amended multiple times. This indicates a significant corporate relationship between Atlantic and IDC.

Stakeholder Impact

Shareholders (Atlantic International Corp.): Significant dilution of existing shareholders' control due to SPP's 42% stake. Potential downward pressure on share price if SPP proceeds with its stated intention to dispose of shares. Restrictions on dividends and share repurchases could limit shareholder returns.
Creditors (IDC Technologies, Inc. and Borrowers): The default and collateral seizure indicate financial distress for IDC and its related borrowers, potentially impacting their ability to meet other obligations.
Management (Atlantic International Corp.): Increased oversight and operational restrictions due to the covenants in the Convertible Promissory Note, requiring consent from SPP for key strategic and financial decisions.
Employees (Atlantic International Corp., IDC, Lyneer): While not directly mentioned, financial distress and significant ownership changes can lead to uncertainty regarding job security or operational stability.

Next Steps

SPP Credit Advisors expects to dispose of as many shares of Atlantic International Corp. as possible over the next several months, based on market conditions and other business considerations.
The Loan Agreement requires Borrowers to pay an annual administration fee of $25,000 beginning April 29, 2025, and on each anniversary thereafter.
The Loan Agreement and Convertible Promissory Note have a maturity date of March 31, 2027, unless earlier triggered by specific events.
The Agent (SPP) has the right to designate an observer to the board of directors of IDC Technologies, Inc. and Lyneer Investments, LLC, with meetings occurring at least twice per year.

Key Dates

Date	Description
2021-08-31	Original Loan Agreement date between IDC Technologies, Inc. and SPP Credit Advisors, LLC, and Pledge and Security Agreement date.
2023-05-29	Original date of the Amended and Restated Agreement and Plan of Reorganization (Merger Agreement) among Atlantic, IDC, and others.
2024-06-18	Original date of the Convertible Promissory Note executed by Atlantic International Corp. payable to IDC Technologies, Inc.
2024-10-31	Date of event which requires filing of this statement (Schedule 13D).
2025-03-31	Date as of which 58,375,488 shares of Atlantic International Corp. were reported outstanding in its Form 10-K.
2025-04-28	Date SPP Credit Advisors exercised post-default remedies, purchased shares and Convertible Note at UCC public sale, and date of Amended and Restated Convertible Promissory Note.
2025-04-29	Date of Amended and Restated Loan Agreement.
2025-05-14	Date Atlantic International Corp.'s Form 10-K was filed, reporting shares outstanding as of March 31, 2025.
2025-05-15	Date of filing of this Schedule 13D and Joint Filing Agreement.
2027-03-31	Maturity date for the Amended and Restated Loan Agreement and the Convertible Promissory Note.

Recommendation

sell

Keywords

SEC Filing, Schedule 13D, SPP Credit Advisors, Atlantic International Corp., IDC Technologies, Loan Default, Beneficial Ownership, Convertible Note, Distressed Debt, Collateral Seizure, Corporate Governance, Financial Covenants, Share Disposition, Investment Management

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