Vertical Aerospace has unveiled a new provisional funding agreement involving a $130 million debt-to-equity swap and the provision of up to $50 million from primary creditor Mudrick Capital.
Mudrick Capital is committing $25 million up-front, with a potential $25 million backstop. This backstop would be reduced if Vertical obtains third-party financing through a planned equity placement.
The injection is part of a $180 million transaction which includes conversion of around $130 million of debt into equity.
If the transaction is completed, Mudrick Capital will take over as the largest shareholder of Vertical Aerospace with a 71% interest, according to a US regulatory filing.
Vertical Aerospace, headquartered in the UK, is developing an air taxi eVTOL designated the VX4.
But the company has recently been engaged in funding negotiations, and has pushed back the entry-into-service date of the VX4 by two years.
Mudrick Capital founder Jason Mudrick says his company’s commitment “underscores our appreciation” of Vertical’s position in the eVTOL sector.
He says the aerospace firm has “demonstrated its ability to deliver groundbreaking solutions” for sustainable aviation.
“We’re supporting a company, its leadership team and partners, as Vertical brings the safest and most versatile aircraft to market,” he adds.
Vertical founder Stephen Fitzpatrick, who has been the main shareholder, will remain on the company’s board in a “strategic direction” role, the company says.
He will have rights to participate in the planned equity placement, on the same terms as other investors. If he chooses not to take part, he will still have the option, over a 12-month period, to invest $25 million in the company at a set price.
The conversion of $130 million in notes – about half the outstanding amount – will “substantially” reduce the company’s debt and improve its financial position by “significantly deleveraging” its balance sheet, says Vertical.
As part of the agreement, the remaining loan repayment date will be extended from 2026 to 15 December 2028.
Vertical adds that remaining outstanding convertible notes will have a fixed conversion price of $3.50 per share, which will give future investors “greater certainty”.
The agreement is set out in a non-binding term sheet, signed by the participants, but implementation is subject to final transaction agreements and shareholder approvals.
“We have been working hard to find a way to support the company in the short term, but also set us up for long-term success,” says Fitzpatrick.
“The additional equity and stronger balance sheet will enable us to fund the next phase of our development programme and deliver on our mission to bring the amazing electric aircraft to the skies.”
Chief executive Stuart Simpson adds that securing funding to address the company’s immediate needs allows it to focus on advancing the VX4’s piloted flight-test programme. The aircraft recently achieved untethered piloted thrustborne flight, and the company is looking to secure UK Civil Aviation Authority permits to expand to wingborne tests.
