Lilium’s main German operating subsidiaries are to file for insolvency amid an ongoing cash crisis at the electric air taxi developer.
Revealing the move on 24 October, the company says the two subsidiaries – Lilium and Lilium eAircraft – “are or will become unable to pay their existing liabilities… within the next few days”.
“The management of the subsidiaries has informed the company that they have to file for insolvency under German law and in doing so will apply for self-administration proceedings in Germany,” it says in a filing to the US Securities and Exchange Commission; those applications are likely to take place “in the coming days”.
Under the proposed self-administration process Dutch-registered parent company Lilium NV is likely to “lose control of the subsidiaries”. Existing management remains in place under the supervision of a custodian and two lawyers acting as “chief insolvency officers”.
The aim of the process is to sell assets or the business as whole to ensure the best return to creditors.
“We are in the process of analysing the potential implications for the company resulting from the insolvency proceedings of the subsidiaries,” Lilium says, a review that could result in the parent also filing for insolvency.
Both the parent company and the subsidiaries “have a limited amount of cash to conduct their operations”, it adds.
Without additional funding “they will not be able to conduct their ongoing operations” and will need “to seek financing from third parties, including any purchaser of their assets”.
Lilium’s shares are traded on the Nasdaq exchange and a delisting may result from the insolvency, it warns. In addition, existing shareholders – including Honeywell, which invested in 2021 – “are also likely to lose the value of their investment in the company”.
Lilium’s current crisis has been triggered by the refusal of the German government to guarantee half of a €100 million ($108 million) loan from the country’s state-owned development bank.
The government of Bavaria – the region in which Lilium is based – was to have provided a guarantee for the remainder of the loan, but the two parties “have not reached an agreement in principle” over the deal.
In addition, “despite its continuous and ongoing fundraising efforts” it was unable to raise “sufficient” external finance to keep the businesses afloat.
Since inception, the company has burned through almost €1.5 billion attempting to bring its electric ducted-fan-powered vertical take-off and landing Lilium Jet to market. A first flight of a conforming test aircraft was due next year against a certification target of 2026 – a highly ambitious timeline.
Financial firm Iceberg Research, which has been consistently sceptical of Lilium’s performance claims, believes there is little chance of the jet meeting that service-entry target.
“Lilium is very far from certification, let alone commercialisation,” Iceberg writes in its latest research note.
It says German taxpayer funds should not be used to prop up the company, adding: “Instead, European governments should let private markets determine Lilium’s value. The companies that see any value in their intellectual property can pick up the pieces.”
Lilium had claimed a backlog of 780 aircraft, with around 100 orders described as “firm” commitments. Major airline customers included Saudia – which placed a firm order for 50 units in July – and cash-strapped Brazilian carrier Azul, which planned to take up to 220 Lililum Jets.
