A British company called Reaction Engines, which is working on incredible new technology that could make super-fast flights possible, is close to finalizing a rescue deal worth £20 million. This deal could be the lifeline the company needs to survive and continue its groundbreaking work. The United Arab Emirates’ Strategic Development Fund (SDF), a large government-backed investment fund, is in talks to become the company’s biggest shareholder. This exciting deal could change the future of air travel, but it’s not without challenges.

The Struggles of Reaction Engines

Reaction Engines has been facing financial problems for a while now. The company, founded in 1989, is working on something amazing: engine technology that can power planes at incredibly high speeds, up to Mach 25—that’s about 19,000 miles per hour! To put that into perspective, that’s more than 25 times the speed of sound. Imagine flying from New York to London in just a few minutes. The company’s technology is so advanced that it could one day be used for space travel, or to bring back super-fast commercial flights like the Concorde, which stopped flying more than 20 years ago.

However, despite all the excitement surrounding their tech, Reaction Engines has been struggling to keep the business running. Over the past few months, they’ve been running low on cash. To avoid going bankrupt, the company is working hard to secure new financing.

The Big Rescue Plan

So, what’s the rescue plan? The Strategic Development Fund (SDF), based in the UAE, is considering becoming Reaction Engines’ largest shareholder. However, this deal isn’t as simple as just handing over the money. Because the company works on advanced technology that could be important for national security, the British government needs to approve the deal first. This falls under the National Security and Investment Act, a law that protects important technology from being taken over by foreign investors without proper approval.

If the deal goes through, the SDF will not own the majority of Reaction Engines, but they will have a significant share. This could be the boost that the company desperately needs.

Existing Investors Stay Cautious

Not all of Reaction Engines’ current investors are as eager to jump on board with more funding. Rolls-Royce, the famous aerospace company, has decided not to participate in this new deal. However, BAE Systems, another big player in the aerospace industry and an existing investor, might still contribute a smaller amount. Reaction Engines is also in talks with several new investors, hoping to attract more funds.

However, the deal hasn’t been finalized yet. The SDF is expected to discuss the potential investment with its committee this week. If everything goes well, Reaction Engines could receive the much-needed cash soon. But if the money doesn’t come through in the next couple of weeks, the company could face insolvency—meaning it might have to shut down.

A Race Against Time

With the clock ticking, Reaction Engines has taken some precautionary steps. They have hired the well-known accountancy firm PricewaterhouseCoopers (PwC) to be ready to step in as administrators if the funding falls through. This means PwC would help manage the company’s assets and debts if they go bankrupt.

In recent weeks, several investors have reduced the value of their shares in the company because of concerns about its future. Despite the exciting technology and potential, Reaction Engines is still losing money, which makes investors nervous.

A Glimmer of Hope: Future Projects

Despite all the financial difficulties, there is hope for Reaction Engines. Last year, the company announced it had raised £40 million in new investments, bringing its total fundraising to around £150 million since its founding. While it’s still struggling, the company has seen an impressive 400% increase in its commercial revenues.

Reaction Engines’ cooling technology, which is crucial for its hypersonic engines, is also attracting attention from military aircraft developers. This means there could be opportunities for the company to make money in the short term, as well as in the future. Their technology could also be used for zero-emission flights powered by hydrogen or batteries, which is something many airlines are interested in as the world looks for cleaner ways to fly.

Not All Smooth Sailing

While Reaction Engines has managed to attract attention from some of the world’s biggest aerospace companies, it still has a lot of work to do. The company’s chairman, Philip Dunne, recently told shareholders that their financial performance last year didn’t meet expectations. He warned that the company would continue to lose money this year as well. Dunne pointed out that although they’ve been able to raise money in the past, the current market conditions are much tougher than they were when they last secured funding in 2022.

In an effort to cut costs, Reaction Engines has reduced its workforce and simplified its leadership structure. These changes may help the company stay afloat while they continue to search for new investors and partnerships.