With the markets in turmoil and tepid demand from institutional investors, Porter Aviation Holdings Inc. has cut the stock price on its $120 million initial public offering, which will launch tomorrow.
Toronto-based Porter will price its stock at $5.50, after underwriters originally planned to price the offering between $6 and $7. Nearly 22 million shares representing 35% of the company will be available for sale. The offering size remains at $120 million.
Proceeds from the IPO will go toward repaying a “non-revolving term loan” of $10.7 million, spending $11 million to complete terminal expansion at Billy Bishop Toronto City Airport and acquiring new Bombardier Q400 turboprops. The company’s long-term debt is close to $300 million.
The Globe and Mail reports that demand from institutional investors has been extremely weak after Porter announced plans for the IPO on April 16th. But an industry source told the Globe that at $5.50, the IPO will likely find success.
In reducing the price, Porter founder and President Robert Deluce will give up more than he wanted: he had previously hoped to sell roughly 28% of privately-owned Porter in the IPO. None of the other existing Porter shareholders are selling any of their stock in the IPO.
Since launching operations in October 2006, Porter has enjoyed a monopoly on commercial flights at Billy Bishop, located on an island off downtown Toronto. But Air Canada Jazz is seeking to start its own service from the airport by the end of this year, possibly with six to 10 round-trips daily on each of the Toronto-Ottawa and Toronto-Montreal routes. Houston-based Continental Airlines could start with two round-trips daily on the Toronto-Newark route.