The prospects of a rescue deal for Britain’s hypersonic aviation pioneer appeared to have dimmed this weekend when it emerged that talks with a Gulf-based government fund had stalled.
Sky News has learned that negotiations between Reaction Engines and the UAE Strategic Development Fund, the investment arm of the Emirati Tawazun Council, about consolidating the company’s recapitalization, have begun to falter.
The reasons for the apparent collapse of discussions with the SDF were not clear on Sunday, although several people close to the situation said the situation was fluid and could be resolved.
They added that Reaction Engines was engaged in the active pursuit of several other investment options.
However, time is running out to secure a financial package that will prevent the company falling into administration.
Reaction Engines is said to require multi-million pound funding backing within days, and strategic shareholders BAE Systems and Rolls-Royce Holdings have also been said to have been asked to agree more flexible terms with the company.
Under previous discussions, SDF would have emerged as the largest single investor in Reaction Engines, which has developed cryogenic technology aimed at powering planes at speeds of up to Mach 25 – or 19,000 miles per hour – outside the Earth’s atmosphere.
Sky News revealed earlier this month that the company had opened talks with the government about the deal, due to the sensitive defense and security implications in the context of the National Security and Investment Act.
The two-part financing, which involves major shareholders providing loans to the company before providing an additional equity infusion, has been the focus of discussions in recent weeks.
The nature of the alternative rescue options being pursued was not clear on Sunday.
Accounting firm PricewaterhouseCoopers (PwC) has been put on standby to act as administrator if the pursuit of new funding fails.
During the past two months, a number of investors in the Financial District reduced the value of their shares in the company amid doubts about its survival.
According to Reaction Engines’ latest shareholder update, it has increased its commercial revenues by more than 400% in the past year and is understood to have a strong pipeline of contracts and R&D opportunities.
In January last year, Reaction Engines announced it had raised £40m of additional equity, bringing the total amount it has taken from investors to around £150m.
The company was founded in 1989 and is headed by Philip Dunne, the former Minister of Defence.
Reaction Engines and Rolls-Royce declined to comment.