A listed green jet fuel company has been saved from insolvency by a consortium featuring private equity and green investors.
Velocys plc has spent the past 20 years developing technology that enables the production of sustainable fuels to help decarbonise global aviation.
Originating from a University of Oxford technology spinout company called Oxford Catalysts – which floated on the London Stock Exchange at almost £2 a share in 2006 – it provides its customers with the technology to enable production of negative carbon intensity, drop-in fuels from a variety of waste materials. It is partnering with British Airways on the Altalto project in Immingham to convert residual waste into sustainable fuels.
It also offers an integrated solution for project developers, owners and operators by supplying reactors, catalysts and associated engineering services.
The firm is focused on developing its proprietary technology solutions ahead of commercial adoption and currently does not have recurring revenues: as a result, it has historically been reliant on equity raises and grant funding to execute its business strategy.
The company, based at Oxford Science Park with an office in Houston and reactor manufacturing facilities in Ohio, faced insolvency and sought emergency funding. Now its board of directors has unanimously recommended that shareholders accept a bid totalling £4.1m from Madison Bidco Limited, a newly formed company, which will see a return of 0.25p per share, approximately its current share price.
It would see the firm delist from the Stock Exchange.
Madison is indirectly owned by a fund advised by Lightrock, a fund advised by Carbon Direct Capital, GenZero and Kibo Investments. Upon completion of the acquisition, it has agreed to provide up to £31.5m of growth capital to Velocys which is expected to ensure that Velocys and its management have the capital resources needed to deliver against Velocys’ medium-term strategic plans.
In connection with the acquisition, the Carbon Direct Fund has agreed to provide a secured bridging loan of £3.5m to provide sufficient capital for Velocys through to the acquisition becoming effective.
Velocys’s advisor Panmure Gordon said it has taken into consideration its limited cash resources, challenging financial position and the absence of alternative funding offers, describing the bridge financing as “vital to avoid insolvency”.
Should the deal fall through, it warned that “it is unlikely that Velocys will be able to repay the bridge financing and remain a going concern. In those circumstances, it is likely that administrators would be appointed promptly and, whilst the administrator would seek to maximise value from the sale of available assets, it is considered highly unlikely that this would result in anything other than minimal returns to Velocys shareholders”.
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