Vertical Aerospace, a global aerospace and technology company pioneering electric aviation, has officially announced a term sheet with its majority shareholder Stephen Fitzpatrick, and its primary creditor Mudrick Capital Management.
Under the agreed terms, Vertical will receive $50 million in new inflow of funding, which the company plans on using to support its newly launched Flightpath 2030 Strategy, something which will help the company establish itself as a global leader in the eVTOL market by the end of the decade, including the ongoing development and certification of the VX4.
Talk about the given term sheet on a slightly deeper level, we begin from a $50 million funding commitment by Mudrick Capital that effectively includes $25 million in upfront funding, and an added $25 million backstop that will be reduced by any amounts raised from third parties. Furthermore, the term sheet includes the option for Stephen Fitzpatrick to invest a further $25 million on the same terms.
“It is great to be able to announce this new funding today. 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. This comprehensive deal – alongside the recent piloted flight campaign and launch of the Flightpath 2030 strategy – means Vertical is positioned to be a winner in one of the 21st century’s most exciting technologies,” said Stephen Fitzpatrick, Founder of Vertical Aerospace.
Next up, we must dig into how the agreement treads up a long distance to strengthen Vertical Aerospace’s balance sheet. This is because an estimated $130 million of convertible notes (50% of the outstanding amount) will be converted into equity at $2.75 per share. Such a move, on its part, will substantially reduce Vertical’s debt, while simultaneously deleveraging the company’s balance sheet, as well as enhancing its financial position.
Moving on, the term sheet also creates greater certainty for future investors. This it does by fixing the conversion price for the remaining outstanding convertible notes at $3.50 per share. Another detail worth a mention here is rooted in the extension of remaining loan repayment date to December 2028 which provides further security through Vertical’s certification programme.
You see, the company’s piloted flight test programme recently edged closer to certification, after it achieved untethered, piloted thrustborne flight in Phase 2 of testing. Now, considering VX4 prototype is performing beyond expectations, the company has already started working with government authorities to secure permits and move into Phase 3, where it will conduct wingborne flight tests, a critical step toward certification.
Coming back to the term sheet, it remains subject to implementation and execution of final transaction agreements, as well as shareholder approval of amendments to Vertical’s articles of association.
Founded in 2016, Vertical Aerospace’s rise up the ranks stems from creating a safer, cleaner and quieter way to travel. The company is known for collectively leverage partnerships with leading aerospace companies, including GKN, Honeywell and Leonardo, as well as an ability to develop its own proprietary battery and propeller technology, all for the purpose of developing the world’s most advanced and safest eVTOL. The company’s excellence in what it does can also be understood once you consider it has already booked 1,500 pre-orders for the VX4, with customers across four continents, including American Airlines, Japan Airlines, GOL and Bristow.
“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. By committing up to $50 million to the business and converting substantial debt into equity, we’re supporting a company, its leadership team and partners, as Vertical brings the safest and most versatile aircraft to market,” said Jason Mudrick, Founder and Chief Investment Officer at Mudrick Capital.
