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A British hypersonic aviation pioneer is this weekend closing in on a £20m rescue deal that will see a Gulf-based sovereign fund becoming its biggest shareholder.
Sky News has learnt that Reaction Engines is racing to finalise a two-part financing that will include leading shareholders extending loans to the company before providing a further equity injection.
City sources said on Saturday that if completed, the UAE state-backed Strategic Development Fund (SDF) would lead the fundraising and become Reaction Engines’ biggest shareholder.
The SDF would not, however, own a majority stake, said one.
The government would need to approve the deal under the National Security and Investment Act because of the advanced technology that Reaction Engines is involved in developing, the source added.
Dubbed a successor to Concorde, the supersonic passenger jet which disappeared from service more than 20 years ago, Reaction Engines is developing engine technology aimed at powering aircraft to Mach 25 – or 19,000 miles per hour – outside the Earth’s atmosphere.
The company has been facing a cash crunch for several months.
Sources said that Rolls-Royce Holdings, the FTSE-100 aerospace group, would not participate in the rescue deal, although they said that BAE Systems, another of Reaction Engines’ existing investors, could commit a small sum.
The company and its advisers are also in talks with several new investors about participating in the financing.
People close to the process cautioned that a deal had yet to be signed, with SDF scheduled to take the proposed transaction to its investment committee this week, they said.
If the first tranche of new money is not forthcoming within the next couple of weeks, Reaction Engines would have no choice but to file for insolvency.
PricewaterhouseCoopers (PwC), the accountancy firm, has been put on standby to act as administrator if the quest for new funding fails.
A number of City investors have in recent weeks slashed…
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