SURF AIR MOBILITY INC. 8-K

What Happened

• Surf Air Mobility, Inc. (SRFM) filed an 8‑K on July 1, 2026 disclosing an Omnibus Amendment and Exchange Agreement that converts the company’s prior senior secured convertible note (original aggregate $74.0M; outstanding $46,857,142.89) into two new secured notes: a New Convertible Note ($16,857,142.89) due July 1, 2027 and a New Term Note ($30,000,000) due January 1, 2028. The company also closed an asset‑backed debenture financing totaling $21.6M (initial ~$7.0M issued June 30, 2026; ~$14.0M to follow) to finance Cessna Grand Caravan aircraft purchases and working capital, and amended related letters of credit and a reimbursement agreement.

Key Details

• Debt exchange: $46,857,142.89 outstanding Prior Note replaced by (i) New Convertible Note $16,857,142.89 (matures 7/1/2027) and (ii) New Term Note $30,000,000 (matures 1/1/2028; 12% interest per annum starting 1/1/2027). Any principal unpaid at maturity is payable at 110% of principal.
• Conversion / dilution: New Convertible Note conversion rate = 896.0573 shares per $1,000 principal (≈ $1.116 per share), representing up to 16,186,615 shares issuable on conversion; holder can force monthly partial redemptions (cash $2.0M or shares subject to volume cap).
• Asset-backed financing: Secured Debentures aggregate face $21.6M (initial ~$7.0M issued 6/30/2026); 13.5% interest paid monthly; maturity 6/30/2031; $600,000 original issue discount; $220,000 monthly amortization beginning 6/30/2027. Issued warrants: tranche A 710,294 shares at $1.2555 and tranche B 617,647 shares at $1.6740 (5‑year term; immediate exercisable) with registration rights.
• Credit support & covenants: Company must provide a $14.0M backstop letter of credit for the debentures and amend a $30.0M LOC for the notes. Reimbursement Agreement amended with Park Lane Investments LLC requires reimbursement if LOCs are drawn (15% interest on draws, 1.0% fee on outstanding backstop LOC) and contemplates issuance of up to 2,500,000 warrants to Park Lane (subject to conditions). The New Notes include covenants requiring minimum controlled cash of $5.0M at all times and $8.0M for at least 45 of any 60 consecutive days, a reserve of 60,000,000 authorized but unissued shares, and at least $30.0M available under an equity line/ATM facility.

Why It Matters

• Balance sheet and liquidity: The transactions extend and reprice existing debt but maintain significant secured obligations and higher interest costs (12% & 13.5% instruments). The company also added liquidity covenants and a required equity facility capacity, which could constrain flexibility if cash drops below required thresholds.
• Potential dilution: Conversion of the New Convertible Note (≈16.2M shares), exercise of debenture warrants (~1.33M shares) and possible Park Lane warrants (up to 2.5M shares) represent meaningful potential equity dilution that retail investors should track.
• Credit risk and downside: The notes and debentures are secured and include events of default; draws on the letters of credit would trigger high reimbursement interest (15%) and could require remittance of equity proceeds to Park Lane—factors that increase creditor protections and could affect equity holders.
• Mechanics: The securities (notes and warrants) were issued in private placements under exemptions from registration and the filing includes forms of the agreements and a press release. Investors should monitor future equity raises, potential conversions/exercises, and compliance with cash and covenant requirements.