Latest news with #Mudrick
Mint
a day ago
- Business
- Mint
Higher Rates Widen Options for Distressed Players, Mudrick Says
(Bloomberg) -- Since 2009, when Jason Mudrick set up his fund Mudrick Capital Management, the world of distressed debt investing has seen three major changes: private equity plays a larger role in the economy, low rates have encouraged highly leveraged capital structures across sectors and there's weaker financial documentation. Traditionally, distressed debt opportunities have emerged when the economy wobbles or specific industries face challenges. But the hike in interest rates in 2022 following a boom in leveraged buyouts stressed companies across sectors, as a majority of firms did not correctly hedge rate risk, Mudrick said on Bloomberg Intelligence's Credit Edge podcast. 'The beauty of this is it impacts all borrowers, not one industry,' said Mudrick, the chief investment officer of Mudrick Capital. 'So we have a very diverse opportunity set, which is very unique to this cycle.' The rush of LBOs came with weak debt documentation, which have allowed companies to move around assets and to pit creditors against each other in an effort to raise more liquidity or reorganize their capital structure outside of bankruptcy court, a maneuver known as a liability management exercise. These type of transactions have elongated the distressed cycle, according to Mudrick, as they often involve distressed debt exchanges, which ratings firms consider a default. That then pushes other investors to sell their holdings. Previously, 'the success or non-success of your investment would ultimately determine on whether you got the valuation right,' said Mudrick. 'Today it's more complicated. You have to value the business, you have to understand the capital structure today, but you also have to understand how that structure may evolve.' The conditions that determine whether a restructuring will give creditors equal treatment or not has also changed. 'We used to think it was really driven by the sponsor. Some sponsors were more aggressive, others were known as being more friendly,' said Mudrick. 'That's not the case anymore. It's so normal to do non-pro rata transactions that I think almost every sponsor out there will consider them.' As an example, Mudrick mentioned Tropicana, which is majority owned by PAI Partners. The private equity firm has a reputation of being a friendly sponsor and yet did a non-pro rata restructuring earlier this year, he said. On the other hand, Cision has done a consensual deal, though it's owned by Platinum Equity, which historically has had a very aggressive reputation in the space, he said. 'You have to evaluate what does the company need, how important is the discount capture, and how important are other things like liquidity needs or maturity extension,' according to Mudrick. Once a company has gone through a liability management exercise, it's unlikely that it conducts a second one, he said. Creditors often times rework covenants as part of the negotiations, which can limit potential options for the company if it struggles again. That makes the post-LME opportunity 'particularly compelling,' Mudrick said. Click here to listen to the full conversation with Jason Mudrick at Mudrick Capital Management. More stories like this are available on
Mint
08-06-2025
- Business
- Mint
Meme stocks made him a fortune. Now he's betting on flying taxis.
After booking a nine-figure profit by riding the meme-stock craze for old-school bricks-and-mortar businesses, hedge-fund manager Jason Mudrick was looking for his next big bet. He was as surprised as anyone that he settled on flying taxis. Mudrick specializes in distressed companies, often established businesses that have fallen out of favor. But when late last year he became the biggest shareholder of a British aerospace startup and forced out its founder, he was making a long-shot play on a futuristic industry that for years has seemed just around the corner—yet still hasn't arrived. The company, Vertical Aerospace, is aiming to bring one of the world's first so-called 'electric vertical takeoff and landing aircraft" to market by 2028. Its aircraft is akin to a battery-powered helicopter that is much quieter, safer and cheaper to operate than its conventional counterpart, while carrying up to six passengers and their suitcases. Called the VX4, it has a range of about 100 miles, able to get a New Yorker to the Hamptons in about 40 minutes. Vertical says the cost-per-mile will rival that of an Uber Black, the ride-hailing app's premier service. Mudrick is aware that, to many, the idea still seems far-fetched. 'We have aircraft, like, they're flying, this industry has sort of become real," he said in an interview. 'I grew up watching the Jetsons but I never thought, 'Hey, someday I'm gonna be involved in creating one of those little craft.'" Aerospace executives have spent years pitching a world where flying taxis are crisscrossing the skies above major cities, ferrying passengers between airports and city centers, and used as ambulances to transport patients and organs. Some envision entirely new commuter towns where residents begin each workday with a short flight to the office. That dream is inching closer. In April, San Jose, Calif.-based Archer Aviation shared flight paths for New York, and last August did the same for Los Angeles. Beta Technologies, out of Burlington, Vt., has installed about 50 charging stations across 22 states and recently flew passengers on an initial version of its aircraft. And over in Dubai, construction has started on the United Arab Emirates' first 'vertiport" ahead of plans for Joby Aviation to begin flying there later this year. Even with the collapse of three of its biggest European competitors over the past year, Vertical remains, in many ways, the underdog. Its primary three U.S. rivals boast bigger budgets and bigger investors. Vertical raised some $90 million in January, enough to help tide it over while it continues with fresh fundraising and the search for a major industrial partner this year. By comparison, Amazon-funded Beta, Toyota– and Delta Air Lines-backed Joby, and Archer—which has joined with Stellantis and United Airlines—have raised some $1.4 billion combined over the past 12 months. All three say they also expect to begin flying passengers in the U.S. as soon as in the next year or two if they can get the blessing from the Federal Aviation Administration. Mudrick says his rivals are being too optimistic, but even so, acknowledges that his aircraft, which has to meet higher European safety standards, will likely come a bit later with deliveries starting in 2028. It isn't clear whether cities and the general public will embrace a new aircraft humming around their homes and offices, adding to already crowded skies, says Adam Cohen, a researcher at the University of California at Berkeley. Among other things, they will add demands to already-stretched air-traffic controllers. Cohen says he expects they will be operational on a 'very small scale" by the end of the decade, with emergency services as one likely way they could be effectively deployed. Still, Mudrick believes the upside justifies the financial risk. 'This is one of those bets that you make, and if it works, it's one you'll talk about for the next 20 years," he said. Originally from Washington, D.C., Mudrick is a Harvard Law School graduate and a former investment banker. He started his eponymous hedge fund in 2009 with $5 million at only 34 years old, and soon after made Business Insider's 'Sexiest Hedge Fund Managers Alive" list. (Mudrick says the article was 'a long time ago.") With a focus on companies that are typically unsexy, his firm's managed funds had soared to $3.2 billion by the end of March. Mudrick's Vertical adventure started in summer 2021. The executive was wrapping up a meeting at his offices on New York's Madison Avenue when Vertical's chairman, Dómhnal Slattery, quietly pulled him aside. ''I'm working on something interesting, I think you should take a look,'" Mudrick recalled being told. Vertical was months away from listing via a special-purpose acquisition company at a $2.2 billion valuation, but needed a cash injection to get there. Mudrick, meanwhile, had only just emerged from his bets on the theater chain AMC and videogame retailer GameStop, which were among the most high-profile meme stocks at the time. The bets netted him roughly $250 million in profits and led to his firm's best month ever, but also ended up evoking the ire of online traders. (He woke up one day to find his firm's Wikipedia page defaced with profanity and insults). He was eager to get Mudrick Capital back to its core strategy: providing debt financing to distressed companies. So he shut Slattery down: 'Not interested." Weeks later, Vertical's chairman tried again, enticing Mudrick with a different offer: forget an equity injection, how did he feel about debt? It worked. Mudrick and his team set about researching the much-hyped industry and found that the proposition was surprisingly simple. Megacities across the globe are plagued with congestion that is only set to worsen. Streets lined with old buildings can't be widened and tunneling is prohibitively expensive. That left one option: 'You've got to go up," Mudrick said. Vertical itself was born out of a traffic jam. A serial entrepreneur, Stephen Fitzpatrick was the new owner of a small Formula One team and had spent four hours in a car trying to make it to the 2015 São Paulo Grand Prix on time. When he got there, he discovered that other team executives had chartered expensive helicopter rides. It gave him an idea. Fitzpatrick created Vertical the next year, redeploying engineers from his F1 team to design a flying taxi. He based it out of Bristol in southwest England, near the area where Britain's first military helicopters were built after World War II. The company for years burned through cash and a collapse in its post-SPAC listing share price dragged its total value to a meager $82 million. After an acrimonious and public battle, Mudrick forced Fitzpatrick out, and in December converted $130 million of his debt to equity and took control of the company. 'Vertical wouldn't be here if he hadn't come up with the idea," Mudrick said of Fitzpatrick. 'But at the end of the day, what the company needs now are not skills that he possesses." Fitzpatrick, who still holds a minority stake, declined to comment. The company now has enough money to make it through the end of this year, but expects to run more investment rounds to get it through the roughly $1 billion certification process it has to complete before it can start delivering the craft, Chief Executive Stuart Simpson said in a separate interview. Vertical's business strategy is simple: It just wants to sell its aircraft like an Airbus or Boeing. Those sales then lock customers into lucrative maintenance contracts which includes the supply of replacement batteries roughly every year. That is different from some other competitors such as Joby, whose strategy is to also operate its own aircraft and establish itself as an Uber of the skies. Vertical has spent most of this year courting potential partners and pitching the business at investor conferences as its aircraft shifts to its final major test phase. It is a role reversal for Mudrick, who is more used to companies coming to him hat in hand and asking for money. 'What we need now is capital, capital and capital," he said.
