Date published: 12 February 2019
Andrew Edgecliffe-Johnson and Mark Vandevelde in New York
Virgin Trains USA has abruptly halted its plans for an initial public offering, days away from the end of an investor roadshow that it hoped would raise $510m to expand its nascent passenger rail service and value the lossmaking business at $3bn.
The company, which changed its name from Brightline in November when it struck a licensing deal with Richard Branson’s Virgin Group, suggested in a brief statement that the IPO process had revealed demand from investors who were more interested in investing in it as a private company.
“As we explored a public offering, a number of alternative financing sources became available that allow us to keep the company private and meet our growth strategies,” said Ben Porritt, senior vice-president of Virgin Trains.
One close follower of the company said, however, that the company had also concluded it could not achieve the valuation it sought in an IPO. “It was a combination of [investor] appetite and people saying they’d be interested if it was private,” he said.
Virgin Trains USA had hoped to price the listing at $17-$19 a share, at the midpoint of which it would have hit a market capitalisation of about $3bn. Virgin Group was set to emerge with no more than a 2 per cent stake, with the vast majority of the stock in the control of funds of Fortress, the private equity group whose co-founder Wes Edens chairs Virgin Trains USA.
Listing documents showed that the company has been in separate discussions about raising up to $2.3bn in debt, and noted that its plans to expand were contingent on it having the funds to acquire certain land rights.
Virgin Trains must raise more than $1bn in construction financing by this June in order to avoid losing a deal with Orlando’s airport authority that would provide land for a station, train shed and proposed railway tracks. The company has said it plans to apply for an extension if the deadline is not met, but cautioned that none might be forthcoming.
Its service, which launched only last year, currently runs from Miami to West Palm Beach in Florida but the company had intended to use the funds from an IPO to extend the service to Orlando and Tampa. It has also set out plans to run trains between Las Vegas and Los Angeles but has yet to break ground on that route.
The IPO roadshow launched hard on the heels of a US government shutdown which halted the Securities and Exchange Commission’s work approving listings, but had been seen as a test of investor appetite for what has been billed as a strong pipeline of IPOs after a slow start to the year.
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