Virgin Rail - Brightline IPO, Bonds & Rebranding

This is a forum for all operations, both current and planned, of Virgin Rail USA formerly known as Brightline, and Virgin Worldwide Rail operations, past and present. Official Sites:
Current Brightline: https://gobrightline.com/
Virgin USA: https://www.virgin.com/richard-branson/ ... trains-usa
Virgin UK: https://www.virgintrains.co.uk/

Moderator: CRail

Re: Virgin Rail - Brightline IPO & Rebranding

Postby Jeff Smith » Fri Feb 08, 2019 3:12 pm

MassTransitMag.com: Hefty debt, station naming rights: Takeaways from Virgin Trains' IPO

...
"There can be no guarantee that we will be able to sustain successful operation of our Florida passenger rail system, or that we will complete our Florida passenger rail system as anticipated or at all," the company says in a document filed this week with the Securities and Exchange Commission.

The Brightline rail service launched in South Florida in 2018, and Virgin Trains USA has ambitious plans to connect Orlando and Tampa. Takeaways from the company's financial filings:

Virgin Trains USA needs money -- a lot of it. Virgin Trains expects to raise net proceeds of $467.8 million in the IPO. The company already has $700 million in debt, and it's looking to borrow $2.3 billion to fund its expansions from West Palm Beach to Orlando and Tampa, and also for a proposed line connecting Los Angeles and Las Vegas. That's after Brightline missed two 2018 deadlines to raise $1.15 billion in a sale of tax-exempt bonds. "We are currently in discussions for a commitment for a one-year bridge loan facility (subject to a one-year extension) to permit us to borrow up to $2.3 billion aggregate principal amount," the company says. "We do not yet have a commitment for such bridge loan facility."
...
Next stop, Willoughby
~Jeff Smith (fka "Sarge") :: RAILROAD.NET Site Administrator
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Re: Virgin Rail née Brightline/AAF Orlando - Miami FL FEC

Postby s4ny » Sat Feb 09, 2019 12:58 pm

The VTUS IPO is scheduled for next week.
IPOs so far in 2019 have been disappointing. VTUS starts trading Wednesday 2/13. Shares are expected to price
in a range of $17-19. I am not hearing any buzz about this deal.

Comparisons were made in previous posts to Jet Blue and Southwest Air. These two companies
were able to successfully compete with higher cost airlines which catered more to business travelers.
Initially, they did not code share with the major airlines. Not sure about now. Transporting
passengers by air is generally a profitable business.

Is there any US private intercity rail transportation business that is profitable?

According to the prospectus, VTUS incurs $18.50 in costs for every $1.00 in revenues.
That is expected to improve, but it is a long way to profitability. Virgin only met 20% of
revenue projections for the first 9 months of 2019. Projections of revenues and
passengers have all been widely missed.

There are numerous at grade crossings on the FEC and this will limit train speeds, and incur potential liabilities. The line
from Cocoa to MCO will be able to travel at high speed, but it is a long way from being built.

There are many leases, agreements between the majority stockholder and VTUS.

Large debt may impede future borrowing. Borrowers want to see a successful IPO, before
making additional loans.

VTUS has little or no control over Florida East Coast, which is owned by a Fortress, a private equity group.
The relationship between Fortress Group and Virgin (Richard Branson) seems vague.
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Re: Virgin Rail - Brightline IPO & Rebranding

Postby bostontrainguy » Sat Feb 09, 2019 2:02 pm

The initial strength of Brightline/Fortress was the potential real estate projects that would greatly help the bottom line. Stripping out the rail operation would only seem to doom it. This brilliant well-executed project could fall apart and now has to stand on it's own. I hope it survives but it's getting more difficult to see how that's possible.

Maybe the project will be brought back into the real estate fold if it's survival is in jeopardy.

BTW - Virgin has announced it is getting into the Cruise business in Miami and building Adult-Only cruise ships. Now figuring that they could offer packages that include Disney World and connections right to the pier in Miami sounds interesting, but being Adult Only would seem to hurt the concept a bit.
Last edited by bostontrainguy on Sun Feb 10, 2019 9:47 am, edited 1 time in total.
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Re: Virgin Rail - Brightline IPO & Rebranding

Postby Arlington » Sat Feb 09, 2019 4:53 pm

You lose credibility when you say that airlines are a fundamentally profitable business.

The airlines are only recently (and perhaps temporarily) profitable. When oil prices spiked they famously go bankrupt and in moments like that it is usually said that they have lost more money across the history of airlines than they have ever made.

The reason that Warren Buffett has sworn off airlines but bought a railroad is because as roads congest (and we aren't building as many new ones as we used to) it means something to have staked out a private Network, vs a "tragedy of the commons" highway system.
"Trying to solve congestion by making roadways wider is like trying to solve obesity by buying bigger pants."--Charles Marohn
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Re: Virgin Rail - Brightline IPO & Rebranding

Postby s4ny » Sun Feb 10, 2019 7:57 am

I said passenger airlines are GENERALLY profitable.

Buffet is buying has again invested in airlines since 1916.
His investments are in freight railroads, I have never heard reports
of him buying passenger railroads.
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Re: Virgin Rail - Brightline IPO & Rebranding

Postby Arlington » Sun Feb 10, 2019 8:43 am

The whole question for VTUS (as with Texas Central) is whether it debt will be manageable, which I am still mulling.

It really has nothing to do with being a passenger railroad (which, in this case, is a more defensible competitive position than most airlines have ever claimed, with the possible exception of New York Air)
"Trying to solve congestion by making roadways wider is like trying to solve obesity by buying bigger pants."--Charles Marohn
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Re: Virgin Rail - Brightline IPO & Rebranding

Postby Jadebenn » Sun Feb 10, 2019 2:43 pm

This is really the key for me. I truly believe that passenger railroads can be profitable... eventually. Which is the issue, as it's a very capital-intensive business in an investing world that has mostly lost the appetite for such. Even Fortress Investment Group, with it's deep pockets, is struggling to keep enough liquid assets on hand to weather the ridership ramp-up period, much less starting Phase II. I personally think they can pull it off, but it's not by any means a "safe" stock, and it'll be priced accordingly. The stock market does not like financial uncertainty.

As for Texas Central, I got into an argument with someone on another site over the subject a while back, and he convinced me of a few things. Their ridership situation is much stronger than Brightline's (I have no doubt that the line if built would completely eat up the DAL-HOU air market and induce a lot of new demand), but their financial situation is more precarious. Essentially: they need below-market interest rates to not get completely sunk by debt service. Thankfully, it seems like they've got some deal worked out with the Japanese Bank for International Cooperation, and they haven't been shy in admitting they also plan to apply for federal transportation loans. Still, that's their weak-point: if they can't get those loans, the project falls through. Virgin, at least, has a stronger financial position than that.
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Re: Virgin Rail - Brightline IPO & Rebranding

Postby benboston » Sun Feb 10, 2019 8:06 pm

Right now, VTUS is a safer bet than Texas Central because Texas Central has never even run a train. For that matter, I think that the Boston Surface Railroad is a safer bet than the Texas Central. Though I think it is risky, remember they have Richard Branson's backing.
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Re: Virgin Rail - Brightline IPO & Rebranding

Postby s4ny » Tue Feb 12, 2019 8:59 am

IPO still scheduled for Wednesday and stated range is $17-19. This is different than most IPOs.

Take a well known IPO like Facebook. There was very strong demand for FB because everyone thought
that everyone else wanted it. The deal priced at $38 and popped to $40+ on the first trade.

The critical difference is that FB did not need to do an IPO to raise money for the business.
FB did an IPO because it offered early investors a chance to get some financial liquidity and
also establish an active market for the stock for employee stock options, etc.
In fact, FB could have operated just like they currently do even if they had never gone public.

VTUS needs to raise capital to build the line from Cocoa to Orlando. Barclays (the manager of the IPO)
told the company to expect to sell 28-30 million shares at a price midpoint of $18.
Certainly this sounded good to the original investors as they had around $7.50 in their shares.

If the demand for shares is weak, usually the IPO manager has to make a choice:
1) postpone the offering;
2) sell fewer shares;
3) cut the price;
4) sell more shares at a lower price to raise the same amount of money.

I think VTUS is faced with the 4 choices today.
If they postpone, the company will lose a lot of credibility. They usually blame
"market conditions," but the market in 2019 has made a great recovery, up over 10%.

If they do a smaller deal at $17, the shares will likely open below the offering price.

If they cut the price, they get less money.

If they cut the price and sell more shares the original investors are diluted.
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Re: Virgin Rail - Brightline IPO & Rebranding

Postby s4ny » Tue Feb 12, 2019 2:07 pm

Postponed
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Re: Virgin Rail - Brightline IPO & Rebranding

Postby Gilbert B Norman » Tue Feb 12, 2019 3:48 pm

Bloomberg coverage of the IPO status:

https://www.bloomberg.com/news/articles ... -s-ipo-yet

We know my skepticism regarding Brightline/Virgin's ability to raise funds in the private capital markets, and let us note, Sir Richard's inspired IPO does not represent any change in the viability of the envisioned Miami-Orlando service.

I can only reiterate, Sir Richard is a showman. His presence, and all his "way out route proposals" as well as the "stronger than likely" friction he has caused within the existing Brightline management, is outweighing anything he can bring to the table with an IPO subscribed to solely in his name.

I can't speak to the success of of his ventures such as within the Recording Industry, but there's much out there to suggest his ventures into transportation, i.e. Virgin Trains UK, and Virgin America Airlines (don't know about Virgin Atlantic or Virgin Australia) have "left a gap" between promise and delivery.
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Re: Virgin Rail - Brightline IPO & Rebranding

Postby s4ny » Tue Feb 12, 2019 5:04 pm

Branson only owns 2% of Virgin Trains US, and probably paid nothing for it, just got the
ownership for lending his name.

Fortress, a NY based hedge fund, owns Florida East Coast and almost all of what was to be VTUS.
In late 2017 Fortress was acquired by Softbank, a Japanese technology investor,
after Fortress got burned on some bad deals, including being the victim of a Ponzi scheme.

It gets more interesting. Sprint is controlled by Softbank. Sprint started
as Southern Pacific Railroad. SPRINT is an acronym for Southern Pacific Railroad Internal Network Telecommunications.

Sprint also operates VIRGIN Mobile. Now, the Branson connection becomes obvious.

Now, the question is, will they ever raise the money to build the line from Cocoa
to Orlando? Is Softbank, with all it has going on, interested in plowing money into this?
Branson is just going along for the ride.

This company has not met a single stated goal. Now add to that this cancelled IPO.
Rumor was that the deal might have been possible at $12 or below, but Fortress chose
to "postpone."
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Re: Virgin Rail née Brightline/AAF Orlando - Miami FL FEC

Postby chrsjrcj » Tue Feb 12, 2019 8:40 pm

IPO shelved for now

https://www.miamiherald.com/news/business/article226155030.html

Brightline says alternative financing sources became available. Read into it as you wish.
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Re: Virgin Rail - Brightline IPO & Rebranding

Postby bostontrainguy » Thu Feb 14, 2019 10:43 am

Richard Branson is going to be on CNBC this morning.
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Re: Virgin Rail - Brightline IPO & Rebranding

Postby Gilbert B Norman » Thu Feb 14, 2019 12:18 pm

Here is a Fair Use quotation from the material Mr
Chrsjrc immediately submitted:

Virgin Trains USA, formerly known as Brightline, has decided to shelve previously announced plans to take the company public.

“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,” the company said in a statement. The company declined a request for an interview, citing its required regulatory quiet period for any securities filings...


Somehow, "alternative financing" means additional public fund guarantees of any bond issue. That translates to "subsidy".

But even if soon it will be "tilt; game over", I have had six superlative rides on Brightline. They have set a standard that will be hard for any passenger carrier to match.

It is my hope that if it's all over, they will go out in the same manner as did the Santa Fe on A-Day Eve.
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