Vertical Aerospace - an electric vertical take-off and landing (eVTOL) aircraft developer based in the UK - has secured new funding after signing a term sheet among the company, its majority shareholder and company founder Stephen Fitzpatrick, and its primary creditor Mudrick Capital Management. Through equity conversion and capital injection, the transaction is expected to add around $180 million to Vertical's balance sheet.
“By addressing our more immediate capital needs and positioning us well to secure funding for the long-term, we can focus on advancing our piloted flight test programme,” said Vertical CEO Stuart Simpson.
Mudrick Capital will commit up to $50 million in the next equity round, consisting of $25 million in upfront funding and an additional $25 million backstop that will be reduced by any amounts raised from third parties. The term sheet includes the option for Stephen Fitzpatrick to invest further $25 million on the same terms.
“This agreement underscores our appreciation of Vertical Aerospace’s position in the eVTOL sector and a team that has demonstrated its ability to deliver groundbreaking solutions for the future of sustainable aviation,” added Mudrick Capital chief investment officer and founder Jason Mudrick.
Fitzpatrick commented: “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. 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.”
Around $130 million of convertible notes - 50% of the outstanding amount - will be converted into equity at $2.75 per share. The company said this will substantially reduce its debt and significantly deleverage its balance sheet. The remaining outstanding convertible notes will be fixed at $3.50 per share, which the company said will ensure greater certainty for investors.
In addition, Vertical's remaining loan repayment date has been extended to December 2028, moving from its initial third quarter 2025 deadline. As the company continues the ongoing development and certification of its VX4 vehicle, the debt extension will provide added security. In the company's first half 2024 results, it noted its need to raise capital and to extend its cash runway as a going concern.
The company is currently working with the UK Civil Aviation Authority to secure permits to move into phase 3 testing for the VX4.