Virgin Trains USA scuttles IPO

Written by William C. Vantuono, Editor-in-Chief
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Sir Richard Branson. Getty Images photo.

Miami-based Virgin Trains USA LLC, previously known as Brightline before it rebranded itself following a 2018 partnership forged with Virgin Enterprises Ltd. and founder Richard Branson, has canceled issuing the IPO scheduled for the week of Feb. 11, saying it will pursue other fundraising options. No indication was given whether it will reconsider an IPO in the near future.

Advised by Skadden Arps Slate Meagher & Flom LLP, Virgin Trains planned to offer 28.3 million shares priced between $17 and $19 each, which would have raised $510 million at the midpoint of that range and established a market capitalization of roughly $3.2 billion, according to U.S. Securities and Exchange Commission filings.

“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,” Virgin Trains Senior Vice President Ben Porritt said Feb. 12.

The IPO proceeds, along with money raised from debt financing and private placements, were meant to expand operations into markets where travelers are seeking medium-distance connections “too long to drive” and ‘“too short to fly.” Virgin Trains operates the former Brightline passenger rail service connecting Miami and West Palm Beach, and has plans to connect with Orlando and Tampa markets. The company is also looking to develop a high-speed rail system in Las Vegas and expand elsewhere in North America.

Virgin Trains’ main stockholders are private equity funds affiliated with Fortress Investment Group LLC, which was not planning on sell any shares in the IPO. Barclays, J.P. Morgan and Morgan Stanley, represented by Davis Polk & Wardwell LLP, were the lead underwriters assigned to Virgin Trains IPO.

Wes Edens

According to a published report, “One close follower of the company said Virgin Trains had also concluded that 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.’” Virgin Group was set to emerge from the IPO with no more than a 2% stake, with most of the stock in the control of funds of Fortress, the private equity group whose co-founder, Wes Edens, chairs Virgin Trains USA.

SEC listing documents showed that Virgin Trains has been in separate discussions about raising up to $2.3 billion in debt, and noted that its plans to expand are contingent on it having the funds to acquire certain land rights. The company must raise more than $1 billion in construction financing by June 2019 to avoid losing a deal with the Greater Orlando Aviation Authority, which operates Orlando International Airport, that would provide land for a station, train storage facility and additional trackage. The company has said it plans to apply for an extension if the deadline is not met, but cautioned that none might be forthcoming.

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