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UK entrepreneur Stephen Fitzpatrick will cede control of Vertical Aerospace, the air taxi start-up he founded, as part of a rescue deal with its largest creditor, ending a protracted fight for the future of the company.
Vertical said on Monday it had secured up to $50mn in new funding from Mudrick Capital, a US distressed debt investor, staving off a cash crunch at the Bristol-based company, which employs about 300 people.
As part of the agreement, about $130mn of loans from Mudrick Capital — half of the outstanding amount — will be converted into equity at $2.75 a share, reducing Vertical’s debt. The repayment date for the balance will be extended to December 2028.
The deal will make Mudrick Capital, founded by Jason Mudrick in 2009, the largest shareholder in Vertical with a stake of just over 70 per cent. Fitzpatrick’s stake will fall from 70 to around 20 per cent and he will remain on the board as a non-executive director. Vertical will continue to operate from the UK.
Stuart Simpson, chief executive of Vertical, said the deal, which has been under discussion for months, would strengthen Vertical’s balance sheet and pave the way for a fresh fundraising round.
As part of the commitment, Mudrick will invest $25mn upfront and backstop another $25mn that will be reduced by any amounts raised from third parties. Fitzpatrick reserves the option to invest a further $25mn.
Simpson said the most important part of the agreement was “deleveraging the balance sheet”, adding that the convertible loan notes had been an “impediment to raising equity”.
The future of Vertical, which is listed on the New York Stock Exchange, has been in the balance for months as its cash reserves dwindled to $60mn at the end of September. Its shares closed at $4.79 on Friday.
Simpson said the new funding would give Vertical enough “runway through to the end of 2025”.
Mudrick said the agreement “underscores our appreciation of Vertical Aerospace’s position in the [electric vertical take-off and landing] sector”.
Fitzpatrick, who is best known in the UK for founding Ovo Energy, welcomed the deal. He set up Vertical in 2015 after becoming convinced of the merits of air taxis while stuck in a traffic jam in São Paulo.
The company is one of a number of flying-taxi companies that went public as special purpose vehicles in 2021, attracting billions of dollars of investment. Most, however, have struggled with high development costs and regulatory approval. German start-up Lilium, which was also listed on the NYSE, filed for insolvency this month.
Vertical has been testing its VX4 vehicle, which will have a range of up to 100 miles, a cruise speed of 150mph and capacity for four passengers. Simpson said the company was committed to bringing its air taxi to market in 2028, describing the timeline as “realistic”.