(Reuters) -UK-based Vertical Aerospace said on Monday that investor Mudrick Capital has agreed to convert half of its outstanding convertible debt to equity and extend the repayment date on the remainder to December 2028, providing the cash-strapped air-taxi maker with financial breathing room.
Mudrick will commit $25 million in upfront funding for Vertical’s next equity round and an additional $25 million backstop, which can be reduced by amounts raised from third parties.
The company’s U.S.-listed shares jumped 14% in light premarket trade.
The agreement will extend Vertical’s cash runway into the fourth quarter of next year. The company had previously flagged going concern doubts.
The term sheet includes an option for Vertical’s founder, Stephen Fitzpatrick, to invest a further $25 million within the next year.
In September, Vertical said it was in talks with Fitzpatrick about his investment commitment after a balance due on August 14 became outstanding.
Mudrick earlier this month served a default notice to Vertical on convertible senior secured notes due 2026 after the company warned it might breach certain covenants.
Under the term sheet unveiled on Monday, approximately $130 million of Mudrick’s convertible notes will be converted into equity at $2.75 per share, Vertical said.
Vertical is among the several eVTOL makers aiming to revolutionize urban travel, but faces regulatory hurdles, battery limitations, and the challenge of convincing the public of their aircraft’s safety.
(Reporting by Abhijith Ganapavaram in Bengaluru; Editing by Tasim Zahid)
Convertible debt is a type of financing that allows investors to convert their debt into equity in the company, typically at a predetermined rate, providing potential upside if the company grows.
Equity represents ownership in a company, typically in the form of shares. Equity holders may benefit from dividends and capital appreciation, but they also bear the risk of loss.
A repayment deadline is the date by which a borrower must repay a loan or debt. Missing this deadline can result in penalties or default.
Cash runway refers to the amount of time a company can operate before it runs out of cash, based on its current cash reserves and burn rate.
Regulatory hurdles are legal or compliance challenges that companies must navigate to operate within the law, often impacting their ability to launch products or services.
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