Stuart Simpson, chief executive of Vertical Aerospace, says the firm is now well-placed to raise further investment following a $180 million deal with its largest creditor Mudrick Capital that includes a $130 million debt-for-equity conversion.
Although the provisional agreement with Mudrick also incorporates a cash injection of up to $50 million in the electric air taxi developer, Simpson argues that “unlocking the balance sheet” is the transaction’s “single most important point”.
In addition to significant deleveraging, the deal sets a price for the previously floating-rate convertible loan notes that Mudrick has held in Vertical since investing in 2021.
The initial $130 million will convert at a rate of $2.75 per share, while the remainder are priced at $3.50 per share, with their maturity date pushed back two years to 2028.
This, says Simpson, removes a significant degree of “uncertainty” that deterred potential investors: “We could not raise money because of the structure of the [2021] deal with Mudrick,” he adds.
“We now have a balance sheet I can go out and raise money on the back of; I think we are in great shape.”
Reaching an agreement was made more complicated by the need to also involve Vertical’s founder and largest shareholder Stephen Fitzpatrick.
Should the transaction proceed, Mudrick will now hold around 71% of Vertical, with Fitzpatrick’s previous stake of almost 95% – including shares held by his Imagination Aero Investments business – reduced to around 20%.
“I’m really pleased to say we have sorted it out,” says Simpson, who describes the tripartite negotiations as “tough but friendly”.
As the largest shareholder, Mudrick will gain a seat on Vertical’s board, although whether this will be filled by founder and chief investment officer Jason Mudrick or a representative is unclear at this stage.
Simpson anticipates Mudrick taking a “hands-off” approach to Vertical’s day-to-day operations: “He’s very, very engaged but won’t be operationally involved.”
Jason Mudrick has been a board observer since investing in Vertical in 2021, Simpson notes. “He has been fully aware of everything for the last three years; he understands exactly what the commitments are, the challenges, the opportunities.”
Fitzpatrick will also remain on the board despite the reduced shareholding, allowing Vertical to benefit from his “passion and energy”, says Simpson.
The deal also gives Fitzpatrick the opportunity to invest $25 million on identical terms to Mudrick.
He had previously pledged to inject $50 million into Vertical and paid an initial $25 million tranche in March, with the balance, due in August, still outstanding.
No reasons for the delayed payment have been disclosed, but the slower-than-hoped-for progress on the second prototype of Vertical’s VX4 aircraft – it only flew for the first time in July – and an inability to secure more outside investment are likely to have been factors.
Payment of the initial $25 million from Mudrick is expected in the first quarter of 2025. The investment firm will additionally backstop another $25 million, the amount reducing if other investors are brought in.
Simpson sees solid interest from the financial community, having received “positive feedback” for its recent Flightpath 2030 strategy document.
Although the pledged $50 million provides Vertical with a cash runway until the end of next year, funding continued development of the VX4, it critically also “buys us a time window”, to raise more investment, he adds.
Vertical intends to hold a capital markets day for investors in the second quarter of 2025, including flight demonstrations of the VX4 at Kemble airfield in southwest England.
