Will Virgin Trains USA’s Brand Help Former All Aboard Florida/Brightline Raise $ 1.85 Billion?


Virgin Trains East Coast Azuma Class 800 101 comes to an unscheduled halt at a red signal at Hampstead Heath station whilst returning to North Pole IEP depot after taking part in the Azuma train media event with Sir Richard Branson at Kings Cross station.

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On November 16, 2018, roughly one month before U.S. District Court Judge Christopher R. Cooper issued a summary judgement to Virgin Trains USA dismissing the Indian River County FL’s lawsuit, Virgin Trains USA LLC filed a Form S-1 with the Securities and Exchange Commission for an $ 100,000,000 Initial Public Offering.

In the Form S-1 it indicates Virgin Trains will be a 5% or less stockholder. railwayage.com wrote that: “There are no percentages of ownership listed [in the Form S-1], so we do not know officially how large a stake Virgin Group has in the Brightline venture, or how much Virgin Group paid for it, if anything. We have learned from a source close to the deal that Virgin’s share is about 3%, a small amount, but we also can reasonably expect that Virgin Group would exercise a great deal of power concerning the venture, since it will control the brand, which is the ‘public face’ of the railroad.”

According to Ryan Lynch, staff writer for the Orlando Business Journal, Brightline president Patrick Goddard said “the Virgin Group’s reputation and trademark licensing agreement should boost Brightline’s profile.”

The Virgin License Agreement has an initial term of 20 years, subject to renewal for up to two additional ten-year periods.  There are certain circumstances under which the Virgin License Agreement may be terminated.

Even with a small minority position Virgin Trains controls the railroad’s reputation before the public, including customers and potential investors, while charging substantial fees for the use of its brand, trademarks and other intellectual property associated with the “Virgin Trains USA” brand.

Until the end of 2020, Virgin Trains will pay the Virgin Group fees the greater of a fixed fee and a percentage of gross revenue rather than net profit, assuming there is a profit.

In addition to the $ 100,000,000 expected to be raised by their IPO, in August 2017 Brightline was approved to go to market with $1.75 billion in private activity bonds for qualified institutional buyers through the Florida Development Finance Corporation. That sale has not yet occurred and the deadline has been extended two times for six month durations.

All Aboard Florida/Brightline needs cash to fund its business plan.

http://www.bizjournals.com reported that All Aboard Florida management stated: “Even if the IPO is successful, Virgin Trains will need billions more to pay for its ambitious expansion plans.”

Railwayage.com also reported that “From the information contained in the document filed with the SEC, it seems that management courted Virgin and its new brand. It appears reasonable to assume that management did not believe that the Brightline brand had what it takes to bring in the money needed to complete the new railroad to Orlando Airport and beyond, and to promote it in such a manner that it would draw sufficient revenue to make enough profit to meet the company’s financial obligations or expectations.”

As reported in http://www.theguardian.com, according to a spokesman for Branson, “branded revenue from companies that bear the Virgin name” topped £13bn last year.

The Financial Times wrote that: “Of the about 80 businesses which bear the Virgin name, spanning sectors from travel, transport, leisure, entertainment, telecoms and media, less than half have direct stakes held by Virgin Group.”

Tens of millions of Americans travel on the railways every day, and we have tried for over a decade to find an opportunity to provide them with that same excellent service experience,” said Sir Richard Branson, founder of Virgin, in a statement to the press.

According to the Virgin Trains Form S-1, “We expect that our intended rebranding will require us to incur costs, including additional advertising and marketing costs. In addition, our intended rebranding efforts could divert our management’s attention away from the operation of our passenger rail line, which could materially and adversely affect our business. We also cannot assure you that our customers will be receptive to our intended rebranding. A failure in our intended rebranding efforts may affect our ability to attract and retain customers, which may have a material adverse effect on our business, contracts, financial condition, operating results, liquidity and prospects.”






Our next article presents signifiant investor risks outlined in Virgin Trains Form S-1, which could potentially scare institutional investors away from the IPO and then the private activity bonds.  Based on these risks we’ll report, would you want to invest?

Without investors, is the proposed route through the Treasure Coast dead?  If so, the whole Virgin Trains USA business plan to extend the train to Tampa and Las Vegas is dead too.  The Treasure Coast is the lynchpin.

It all seems to be a bet by Virgin Trains USA that the high-speed railway will prevail.




One thought on “Will Virgin Trains USA’s Brand Help Former All Aboard Florida/Brightline Raise $ 1.85 Billion?

  1. Pingback: Would You Invest in Virgin Trains USA LLC? | Vero Communiqué

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