By Abhijith Ganapavaram

Nov 25 (Reuters) - UK-based Vertical Aerospace ( EVTWF )

said on Monday that investor Mudrick Capital has agreed to

convert 50% of its outstanding convertible debt notes to equity

and extend the repayment date on the rest to December 2028,

giving the cash-strapped air-taxi maker financial breathing

room.

Mudrick will also commit $25 million in upfront funding in

Vertical's next equity round and an additional $25 million

backstop that will be reduced by any amounts raised from third

parties, according to a press release being published later

today.

The agreement will extend Vertical's cash runway into the

fourth quarter of next year. The company had previously flagged

going concern doubts.

The term sheet includes an option for Vertical founder

Stephen Fitzpatrick to invest a further $25 million into the

company in the next year after he missed a previous deadline to

inject money.

Mudrick earlier this month served a default notice to

Vertical on convertible senior secured notes due 2026 after the

company told the investor it might fall foul of certain

covenants under their agreement.

Under the term sheet unveiled on Monday, approximately $130

million of Mudrick's convertible notes will be converted into

equity at $2.75 per share, Vertical said.

The company is among a few eVTOL makers looking to upend

urban travel by offering rides. However, the industry needs to

tackle regulatory hurdles and overcome battery limitations. They

also have to convince the public that their aircraft are safe.