Porter Airlines may revisit plans for an IPO in the first half of 2011.Peter Power/The Globe and Mail
Porter Aviation Holdings Inc. founder Robert Deluce says his decision to shelve a $120-million initial public offering is a temporary setback, insisting the regional carrier remains on a growth path.
"You know that the stock market has been rather unstable. From our perspective, given current market conditions, we came to the conclusion that it was prudent to defer the offering at this time and wait for better conditions to return," Mr. Deluce said in an interview Tuesday, after he postponed the IPO.
"We had always considered doing this in the fall, and we're well positioned to wait until market conditions stabilize. We've never felt under any pressure to do it in the spring."
Toronto-based Porter was scheduled to price its stock at $5.50 on Tuesday, preparing to sell 21.82 million shares or a 35.3-per-cent stake in the company. But demand from institutional investors proved to be extremely weak, even after Porter twice extended the closing date for the IPO, including taking steps last week to chop the pricing from the original $6 to $7 a share, said an industry insider familiar with Porter.
Right up to the last hour, underwriters were hoping to have the IPO fly. "Books close today at noon Toronto time. Pricing is scheduled for tonight," said a memo sent to investment brokers Tuesday morning. Late afternoon, however, brokers received the update: "The issue has been withdrawn due to market conditions."
Industry analysts have wondered about Porter's ability to post profits because the carrier has lost $44.5-million since it launched operations in October, 2006.
Mr. Deluce countered that Porter has gradually improved its financial and operating performance, noting that the airline has grown in consumer popularity, with the number of passengers in the first quarter more than doubling to 286,097. In the first quarter, Porter's loss narrowed to $6-million, compared with a $9.4-million loss in the same period last year.
"We're encouraged by the way that our business continues to develop," he said.
Robert Kokonis, president of airline consulting firm AirTrav Inc., said investors will likely have the chance to examine Porter's results for the second and third quarters before the carrier makes another attempt to raise money through an IPO.
"I suspect Porter will be back," he said, adding that November could be the company's next window of opportunity to revisit equity markets, even if Air Canada Jazz breaks Porter's monopoly at Billy Bishop Toronto City Airport, located near the downtown core.
Amid uncertainty about the pace of global economic recovery, Porter suffered because the airline industry traditionally is among the last industries to benefit from revived consumer confidence, Mr. Kokonis said.
The leading Porter shareholder is Regco Capital Corp., the vehicle of a group of investors led by Mr. Deluce.
With part of the IPO's proceeds, Porter had planned to repay a $10.7-million "non-revolving term loan," but that debt isn't due until 2011. As well, Porter has a credit facility to still spend $11-million to complete expansion of the terminal at Billy Bishop, but it's unclear how the IPO's delay will affect plans to order new planes.
"We'll go back to the drawing board," Mr. Deluce said. "For us to wait just makes an inordinate amount of sense. Candidly, we thought it was the right time to raise some additional capital to fund future growth, but under no circumstances were we prepared to sell our stock at any price. That just wasn't in the cards."
Brent Jang