Vertical Aerospace’s largest creditor Mudrick Capital has submitted fresh financing proposals that could see it inject up to $50 million into the UK-based electric vertical take-off and landing developer.
While a substantial softening over a previous proposal, the latest offer would still see Vertical founder Stephen Fitzpatrick lose his controlling stake in the business.
Disclosed in a US stock exchange filing, Mudrick’s plan sees it commit to $25 million in Vertical’s next funding round, plus act as a “backstop” for a further $25 million.
In exchange, it would convert $136 million, or approximately one-half, of the notes it holds in the company into shares, at a price of $2.75 per share.
Although this would leave existing shareholders with only around 20% of the business – what it calls “a substantial ownership stake” – it says the offer is a “significant improvement upon our prior proposals” and sees it make “material economic concessions”.
The debt-for-equity swap will also make Vertical’s shares “more attractive and improve the company’s ability to raise future financing, thereby increasing its enterprise value,” Mudrick argues in a letter to Vertical’s board.
It points out that the “unfortunate” alternative, “a comprehensive restructuring transaction” – likely some form of insolvency event – “will result in existing shareholders receiving zero stake in the ongoing enterprise.”
The pledged $25 million would be sufficient to fund the business “through the end of 2025 and possibly into 2026”, it says.
Vertical disclosed on 12 November that as of end-September it held cash and cash equivalents worth £42.8 million ($57.4 million), against expected capital expenditures over the next 12 months of around £80 million.
Mudrick’s previous offer would have seen a total of $75 million injected in to Vertical – $25 million of its own cash and $50 million from external investors – in exchange for shares and warrants. However, this deal had been repeatedly rebuffed by Fitzpatrick.
In January this year, Fitzpatrick agreed to provide Vertical with $50m of funding, although only an initial payment of $25 million was made.
As part of its latest proposal, Mudrick says it “would be supportive” if Vertical “offers Mr Fitzpatrick a release from the company for claims in connection with his failure to fund $25 million” and also “offers to cover his legal costs in connection therewith.”
Mudrick also commits its support to Fitzpatrick remaining on the boards of both the US-listed entity and its UK subsidiary in an unpaid position, providing his stake in the business remains at more than 5%.
However, the remaining board members would “be independent” and Fitzpatrick would also lose all “veto rights” over decisions.
Additionally, Mudrick would “provide good faith assurances that the company will remain headquartered and based in the United Kingdom, subject to parameters to be determined,” it says, plus retain the Vertical Aerospace name and brand identity.
Mudrick invested in Vertical in 2021, pledging $200 million – the balance has since risen to $250 million – in return for convertible notes and warrants. These are due to vest in December 2026, although Mudrick now proposes that the maturity date is extended until 2028.
In a stock market update on 12 November, Vertical said it “remains optimistic” that discussions between the firm, Mudrick and Fitzpatrick ”will culminate in a consensual transaction” not only funding the business “further into 2025” but which would also “remove or mitigate certain structural obstacles that have impeded the company from accessing substantial third-party funding since its public listing.
”The company’s objective is that such a transaction would facilitate a clearer path to delivering fundraising opportunities to support it through to completion of the development and certification of its aircraft.”
