SCHEDULE: ECD Automotive Design: ATW Partners Boosts Stake, Funds Merger

ATW Partners and affiliates have increased their beneficial ownership in ECD Automotive Design to 100% through a series of transactions including a preferred stock exchange and a short-form merger, funded in part by a new convertible note.

Summary

• ATW Partners Opportunities Management, LLC and its affiliates (Defender SPV LLC, ATW OPPORTUNITIES MASTER FUND II, LP, Kerry Propper, and Antonio Ruiz-Gimenez) now beneficially own 100% of ECD Automotive Design, Inc.'s common stock, totaling 207,008,547 shares.
• This ownership was achieved through an exchange transaction on March 11, 2026, where 3,633 Series C Preferred Shares were converted into 207,008,547 shares of Common Stock at an exchange rate of $0.0176 per share.
• A subsequent short-form merger converted other common stock into a right to receive $0.0176 in cash, with remaining common stock cancelled and ATW Classic's membership interests converted into common and preferred stock.
• To fund the merger consideration, ECD Automotive Design, Inc. issued a Senior Secured Convertible Note to Defender SPV LLC on March 23, 2026, with an original principal amount of $395,859.66.
• The purpose of the convertible note is to facilitate the payment of merger consideration and provide working capital for the Issuer.

Sentiment

Score: 2

Explanation: StockSavvy.ai views this as a highly negative development for public shareholders, who are being bought out at a very low valuation, and indicative of significant financial distress for the company, despite the capital injection.

Positives

• The transaction consolidates ownership, potentially streamlining decision-making and strategic direction for ECD Automotive Design, Inc. under ATW Partners' control.
• The issuance of the Senior Secured Convertible Note provides immediate financing for the merger consideration and additional working capital for the company.
• The note is secured, offering a level of protection to the holder (Defender SPV LLC) for its investment.

Negatives

• The short-form merger effectively takes the company private for existing public shareholders (other than the reporting persons) at a very low valuation of $0.0176 per share, which likely represents a significant loss for many.
• The company is taking on additional debt ($395,859.66 Senior Secured Convertible Note) to fund the merger consideration, increasing its liabilities.
• The extensive covenants in the convertible note impose significant limitations on the company's operational and financial flexibility, potentially hindering future growth or strategic initiatives.

Risks

• Dilution Risk: The convertible note allows for conversion into common stock, which could dilute future equity holders if the note is converted.
• Financial Covenant Breach Risk: The company is subject to several financial tests (Available Cash, Minimum Adjusted EBITDA, Fixed Charge Coverage Ratio). Failure to meet these could trigger an Event of Default, leading to mandatory redemption at a premium.
• Liquidity Risk: The Available Cash Test requires a minimum cash balance, and the Minimum Adjusted EBITDA Test requires increasing profitability, which could be challenging for the company.
• Operational Restrictions: Covenants restrict the company's ability to incur new debt, create liens, make certain investments, pay dividends, or sell assets, potentially hindering growth or strategic initiatives.
• Event of Default Risk: Numerous events, including trading suspension, failure to deliver conversion shares, payment defaults, bankruptcy, significant judgments, or material adverse effects, could trigger an Event of Default, leading to mandatory redemption at a premium.
• Appraisal Rights: Shareholders not part of the merger consideration may exercise appraisal rights, potentially leading to legal costs and higher payouts for the company.

Future Outlook

The filing indicates the Senior Secured Convertible Note provides financing for working capital, suggesting an intent to continue operations and potentially grow, subject to the strict financial covenants and limitations outlined in the note. The maturity date of December 12, 2026, provides a timeframe for the debt.

Industry Context

StockSavvy.ai notes that the consolidation of ownership by ATW Partners and affiliates, effectively taking ECD Automotive Design private for most public shareholders, is a common strategy in distressed or undervalued companies. The issuance of a secured convertible note to fund the transaction is typical for such leveraged buyouts, providing capital while imposing stringent financial and operational controls on the acquired entity. The automotive design and restoration industry, while niche, can be capital-intensive, making such financing structures relevant.

Comparison to Industry Standards

• StockSavvy.ai observes that the conversion price of $0.0170 and the merger consideration of $0.0176 per share are extremely low, suggesting a significant undervaluation or a distressed situation for ECD Automotive Design, Inc. This contrasts sharply with valuations seen in successful, publicly traded automotive design or luxury vehicle companies, where per-share values are typically much higher.
• For example, luxury automotive brands or high-end restoration companies often trade at multiples of earnings or revenue, implying significantly higher per-share values than what is indicated here.
• The terms of the convertible note, particularly the high default interest rate (Prime Rate + 8%) and redemption premiums (125% for Event of Default, 120% for optional redemption), are indicative of a high-risk lending environment, often associated with companies facing financial challenges or undergoing significant restructuring.

Corporate Governance

Legal Proceedings

• The filing mentions potential legal proceedings related to appraisal rights for shareholders in the short-form merger.
• The convertible note defines final judgments for payment of money aggregating in excess of $500,000 not bonded, discharged, settled, or stayed within 30 days as an Event of Default.

Related Party Transactions

• The exchange transaction involved ATW Classic Equity LLC (a wholly-owned holding company of Defender SPV) and the Issuer.
• The Senior Secured Convertible Note was issued by the Issuer to Defender SPV LLC.
• The funds for the acquisition of common and preferred stock by the reporting persons were derived from the working capital of ATW OPPORTUNITIES MASTER FUND II, LP, which is a reporting person.

Stakeholder Impact

• Shareholders (non-reporting persons): Will receive $0.0176 per share in cash, effectively being bought out at a very low valuation. Those with appraisal rights may seek a higher valuation.
• Reporting Persons (ATW Partners & affiliates): Have gained 100% beneficial ownership and control of the company, consolidating their investment and strategic direction. They are also the holder of the new secured convertible note.
• Creditors: The new Senior Secured Convertible Note ranks pari passu with other existing notes and senior to other indebtedness, providing a strong position for the noteholder. Other creditors might find their claims subordinated.
• Employees/Customers/Suppliers: The impact is not directly detailed but the consolidation of ownership and new financing could stabilize operations or lead to strategic shifts. The restrictive covenants might affect operational flexibility.

Next Steps

• The company will continue to make interest payments on the Senior Secured Convertible Note, potentially in shares of Common Stock or cash.
• The company must comply with numerous financial and operational covenants outlined in the convertible note, including maintaining specific cash levels, EBITDA, and fixed charge coverage ratios.
• The company is obligated to publicly disclose any failure to meet its financial tests.
• The Senior Secured Convertible Note matures on December 12, 2026.

Key Dates

Recommendation

The filing details a short-form merger where public shareholders (excluding the reporting persons) are being cashed out at an extremely low price of $0.0176 per share. This indicates a significant loss for existing public investors. The company is effectively being taken private by ATW Partners and its affiliates, leaving no public market for the stock. Therefore, a 'strong sell' is appropriate for any remaining public shareholders to realize the cash consideration, as there will be no future public trading or upside potential.

Keywords

ECD Automotive Design, Schedule 13D/A, Beneficial Ownership, Short-Form Merger, Convertible Note, Corporate Governance, Financial Covenants, ATW Partners, Private Transaction, SEC Filing