Loss-making Lilium is increasingly confident that it will gain approval “in the coming weeks” for a vital €100 million ($110 million) convertible loan from the German state development bank on which the company’s immediate future hinges.
Subject to guarantees from the German federal government and the state of Bavaria, the loan will provide crucial working capital for the Munich-based electric vertical take-off and landing (eVTOL) aircraft developer.
Highlighting the critical nature of the negotiations in its half-year accounts on 30 September, Lilium said it “requires additional capital immediately to continue to fund its ongoing operations”.
Obtaining the loan guarantees, discussions relating to which are at an “advanced” stage, alongside the loan itself “are subject to an ongoing governmental approval process”, which is expected to be concluded “within the next few weeks”, it says.
“It is expected that a further three to five weeks would be required to complete and sign definitive documents and for Lilium to receive the first of two tranches of the government convertible loan.”
However, it says the loan tranches will be subject to certain conditions, notably “requirements that Lilium has received minimum commitments for additional funding from other investors”, alongside “various operating covenants and governance rights”.
Although Lilium has so far received commitments from existing investors for approximately €32 million “to meet the immediate liquidity requirements of the group and to contribute to the minimum funding requirement”, some of those payments in turn hinge on federal government approval of the loan guarantees.
Lilium’s management is “currently in discussions with existing shareholders, prospective investors and finance partners to secure further funding” – through issuing additional shares or warrants, or other financial instruments.
These investments would be used to “satisfy the minimum funding requirement for the first tranche of the government convertible loan, and to meet the capital requirements for the group’s ongoing operations until the funds from the first tranche are received by Lilium,” it says.
But the company warns of the consequences if it fails to secure the first loan payment. Management, it says, “will be forced to implement significant cost containment measures, materially reduce the scope of our operations, and/or make filings with respect to our financial condition as may be required under applicable insolvency laws with respect to Lilium and its subsidiaries”.
Nonetheless, management remain confident in the developer’s future: “Despite this uncertainty, management is continuing to take actions to secure sufficient financing and thus believe that the application of the going concern assumption for the preparation of these consolidated financial statements is appropriate,” it states.
Operating losses for the six months ended 30 June rose to €186 million, up from €128 million in the same period a year earlier, largely driven by research and development spending that grew to €130 million from €84 million.
Within that total, payments to suppliers and cash spent on testing activities were notably higher year on year, with the former almost doubling to €46 million.
Since inception, Lilium has made accumulated losses of €1.4 billion, the accounts state.
Fundraising efforts this year, chiefly through share and warrant sales, yielded net proceeds of around €102 million in the first half.
At 30 June, Lilium held cash, cash equivalents and other financial assets of €118 million, down from €203.1 million at 31 December 2023, with “no substantial debt”.
Changes in the fair value of warrants did at least allow Lilium to book €108 million of finance income – a reversal of the first-half in 2023, where changes the other way generated a €255 million finance loss – leading to a pre-tax loss of €86 million, against €385 million the year before.
Future sources of income also could include a loan from the French government – which would see it locate a production facility in the country – and pre-delivery payments from customers which will be triggered by the Lilium Jet reaching certain development milestones.
Certification and service entry for the Lilium Jet are expected in 2026. The initial conforming test aircraft – to be used for ground testing – has been powered on for the first time, the company announced on 1 October.
A second example, MSN2, will be the first flight-test article. It is currently in final assembly and is expected to fly in the first quarter of 2025. The fuselage of aircraft MSN3 is currently being built by its supplier, and work on MSN4 is due to begin in the first half of next year, says Lilium.
It plans to use a total of six aircraft for the flight-test campaign.
Following completion of the Lilium Jet’s critical design review in April 2024, the company is working with the European Union Aviation Safety Agency to agree the aircraft’s certification programme, it says.
