Vertical Aerospace is currently engaged in advanced discussions with creditors to secure a rescue deal, which may result in the company’s founder relinquishing control of the Bristol-based manufacturer of electric flying taxis.

A potential announcement could come as soon as Tuesday, focusing on an agreement with Jason Mudrick, an American investor specializing in distressed debt. This deal would involve converting $200 million in loans from Mudrick Capital into a significant equity share, which would considerably reduce Stephen Fitzpatrick’s current 70 percent stake in the company.

As an innovator in electric vertical take-off and landing (eVTOL) aircraft, Vertical Aerospace is currently testing its VX4 model. This eight-rotor, battery-powered aircraft seats four and is designed to achieve speeds of 150 mph with a range of up to 100 miles.

The eVTOL aircraft could serve as an alternative to traditional helicopters, contributing to reduced noise and pollution in urban transport. Several airlines, including Virgin Atlantic, have expressed interest in utilizing these flying taxis for transporting affluent passengers to and from major airports like Heathrow. Other potential uses could involve short city commutes, sightseeing, and medical emergency evacuations.

However, the financial stability of Vertical Aerospace remains uncertain. Reports suggest that the company’s cash reserves may have fallen below £50 million, and its shares on Nasdaq have experienced a dramatic decline, dropping from a market value of $2 billion at its 2021 floatation to only $82 million.

Despite facing a potential liquidity crisis, Vertical has confirmed that it will proceed with an investor strategy update during the week. It is reported that the company aims to finalize negotiations involving Fitzpatrick and Mudrick, a former banker at Merrill Lynch, to convert Mudrick’s loans into a $25 million cash inflow to bolster its operations. As the largest creditor, Mudrick’s involvement is crucial.

Successfully concluding this deal could also help Vertical attract new equity investors, further diluting Fitzpatrick’s stake, as he has been funding the company’s operations to date.

The upcoming strategy update is expected to provide insights into the progress of the VX4 prototype testing and outline the timeline for aircraft certification and potential public test runs at locations such as Heathrow.

The necessity for additional funding is critical, as the company acknowledges needing at least several hundred million dollars to advance its planned production timeline set for 2027.

The challenges facing Vertical Aerospace reflect broader issues within the aerospace industry, highlighted by the recent collapse of German eVTOL competitor Lilium, which exhausted €1 billion in funding. Meanwhile, Rolls-Royce, a previous partner of Vertical, terminated its relationship earlier this year and shut down its electric aviation division this fall. Additionally, the UK aerospace sector has seen other companies like Reaction Engines, known for hypersonic technology development, go bankrupt last month.

A representative for Vertical stated, “We cannot comment on ongoing discussions with investors, but we are exploring all available options concerning our funding requirements.”

Vertical Aerospace currently employs around 350 people and claims to have a $6 billion order book, with 1,500 aircraft orders from clients across Britain, Europe, North and South America, and the Far East, including American Airlines, Japan Airlines, and Virgin Atlantic.