WASHINGTON — Virgin Orbit said Feb. 1 it raised $10 million from another Virgin affiliate, a move that provides only a short-term fix to its financial difficulties.
In a filing with the U.S. Securities and Exchange Commission (SEC), the launch provider said it raised $10 million in the form of a senior secured convertible note from Virgin Investments Limited (VIL), the investment arm of the Virgin Group., on Jan. 30 Virgin Orbit said it would use the proceeds as working capital for the company.
This is the third time in as many months that Virgin Orbit raised modest amounts of funding from VIL. In November, Virgin Orbit raised $25 million in the form of a senior unsecured convertible note from VIL, followed Dec. 19 by $20 million in a senior secured convertible note.
The notes are debt, the first two at interest rates of 6% and the latest at 12%, that can be converted into Virgin Orbit shares under certain conditions. The notes, now including the initial unsecured one in November, are secured by Virgin Orbit’s assets, giving VIL “first-priority security interest” to those assets, including its Boeing 747 aircraft. If Virgin Orbit defaults on the notes, it stated in its SEC filing, “VIL is entitled to, among other things, foreclose on the assets that are the subject of the security interest.”
Virgin Orbit did not disclose additional details about this latest funding, including why it raised this amount at this time. A company spokesperson, asked about the funding, referred back to the SEC filing.
The company has been facing a cash crunch for some time given ongoing losses and dwindling cash reserves. In its most recent financial results, Virgin Orbit reported an operating loss of $50.5 million in the third quarter and $149.5 million for the first nine months of 2022.
The company reported ending the third quarter with $71 million of cash on hand. Even with the money raised from VIL, its current rate of losses could put the company at risk of running out of cash as soon as the second quarter unless it can secure additional funding.
Those problems are exacerbated by a failure on Virgin Orbit’s most recent LauncherOne mission Jan. 9, its first launch from the United Kingdom. The company said Jan. 12 that the rocket’s upper stage suffered an unspecified anomaly that caused a premature shutdown, preventing the vehicle from reaching orbit.
Virgin Orbit has not provided any updates on the status of the investigation or return-to-flight plans since its Jan. 12 statement. The U.K.’s Air Accidents Investigation Branch and the U.S. Federal Aviation Administration are jointly overseeing the investigation.