Lilium Faces Bankruptcy as Subsidiaries Prepare to Fold

Lilium NV, the parent company of Germany’s Lilium (Oberpfaffenhofen) and Lilium eAircraft, is on the brink of bankruptcy, warning that it may need to file for insolvency. This announcement follows the impending insolvency filings of its wholly-owned subsidiaries, which are set to initiate self-administration and debtor-in-possession proceedings under German law in the coming days.

In a filing with the U.S. Nasdaq on October 24, Lilium highlighted the severe implications of the situation, stating, “We are in the process of analyzing the potential implications for the company resulting from the insolvency proceedings of the subsidiaries.” The company is closely examining whether it has grounds for its own insolvency, with a possible outcome being a formal insolvency filing.

Lilium’s management indicated that the subsidiaries are expected to file for insolvency in a German court shortly and seek self-administration. However, there is no guarantee that the court will approve these applications. The company has reported limited cash reserves, asserting, “Unless the subsidiaries receive additional funds, they will not be able to conduct their ongoing operations consistent with past practice and will need to seek financing from third parties, including any purchaser of their assets.”

The financial troubles for Lilium arose after the budget committee of the German parliament decided not to approve a EUR 50 million (USD 54 million) guarantee for a proposed EUR 100 million (USD 108 million) convertible loan from KfW, the German state-owned investment bank. Additionally, negotiations between Lilium and the Free State of Bavaria regarding a EUR 50 million guarantee have yet to yield results.

Despite ongoing fundraising efforts, Lilium has struggled to secure the necessary capital to sustain the operations of Lilium GmbH and Lilium eAircraft GmbH. This inability to raise funds has left the companies overindebted and unable to meet their immediate financial obligations.

The company faces fierce international competition for grants and loans from countries including the United States, France, China, Brazil, and the United Kingdom. Lilium’s investors consider government support essential to maintaining market confidence and attracting future investments. CEO Klaus Roewe emphasized the importance of the EUR 100 million state-backed loan for securing additional private investment.

“We had conditionally secured additional private capital to complement the KfW loan,” Roewe noted, adding that without governmental backing, the German subsidiaries had no choice but to pursue self-administration.

Lilium is also seeking a French government guarantee for a EUR 219 million (USD 237 million) loan aimed at financing a battery factory and assembly line in southwest France.

The self-administration procedures, a type of debtor-in-possession process under German insolvency law, are designed for financially distressed businesses to preserve and continue operations. Management will retain control while operating under the oversight of a custodian, appointed to ensure compliance with insolvency laws.

Lilium warned that filing for insolvency could lead to the delisting or suspension of its ordinary shares from trading on the Nasdaq Global Select Market. Such an event could result in shares trading only over the counter, further diminishing their value and impacting shareholders.

Founded in 2015 and based in Oberpfaffenhofen, Bavaria, Lilium employs around 500 aeronautical engineers. The first manned flight of its electric vertical take-off and landing (eVTOL) flying taxi has been postponed until early 2025. Lilium had anticipated pre-delivery payments and new investments to sustain operations through 2026, aiming to deliver on an order pipeline of over 780 Lilium jets for operators across multiple regions, including the U.S., South America, Europe, Asia, and the Middle East.

Key customers include Saudia Group, which has ordered up to 100 Lilium eVTOL jets, and UrbanLink Air Mobility, which partnered to acquire 20 aircraft. Lilium has also signed a memorandum of understanding with Lufthansa Group to explore strategic partnerships for eVTOL operations in Europe.

Sources: AirGuide Business airguide.info, bing.com, ch-aviation.com