IPO Report: Fortress Transportation and Infrastructure Investors Ltd. (FTAI)

Francis Gaskins |

Fortress Transportation and Infrastructure Investors Ltd. (FTAI) owns and acquires high quality infrastructure and equipment that is essential for the transportation of goods and people globally. It is based in New York, NY.

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SEC Documents

Manager, Joint-managers: Citigroup, BofA Merrill Lynch, Barclays, Deutsche Bank Securities, UBS Investment Bank
Co-managers: JMP Securities, Raymond James, Stephens, Wolfe Research Securities

End of lockup (180 days): Tuesday, November 10, 2015
End of 25-day quiet period: Monday, June 8, 2015

FTAI scheduled a $400 million IPO with a market capitalization of $1.47 billion at a price range midpoint of $20 for Thursday, May 14, 2015 on NYSE.

Fortress Transportation and Infrastructure Investors Ltd. Summary

FTAI owns and acquires high quality infrastructure and equipment that is essential for the transportation of goods and people globally.

FTAI currently invests across four market sectors: aviation, energy, intermodal transport and rail. FTAI targets assets that, on a combined basis, generate strong and stable cash flows with the potential for earnings growth and asset appreciation.

Fortress Transportation and Infrastructure Investors Ltd.Valuation

Glossary

Per share dilution

.

.

-$4.10

     
             

Valuation Ratios

Mrkt Cap (mm)

Price /Sls

Price /Erngs

Price /BkVlue

Price /TanBV

% offered in IPO

Fortress Transportation and

Infrastructure Investors Ltd. (FTAI)

$1,470

22.3

-28.5

1.1

1.3

27%

2014yr, Adj net income

         
             

Fortress Transportation and Infrastructure Investors Ltd. Conclusion

Neutral

6.6% expected annual dividend

P/E of -28.5

Price to sales of 22

1.3 price to tangible book value

Fortress Transportation and Infrastructure Investors Ltd. Business

FTAI owns and acquires high quality infrastructure and equipment that is essential for the transportation of goods and people globally.

FTAI currently invests across four market sectors: aviation, energy, intermodal transport and rail. FTAI targets assets that, on a combined basis, generate strong and stable cash flows with the potential for earnings growth and asset appreciation.

Fortress Transportation and Infrastructure Investors Ltd. Five Reportable Segments

Aviation Leasing, Offshore Energy, Shipping Containers, all of which are within Equipment Leasing Business, and, Jefferson Terminal (formerly known as Crude-by-Rail Terminal) and Railroad, which together comprise the Infrastructure Business.

Fortress Transportation and Infrastructure Investors Ltd. Growth Plan

FTAI’s existing mix of assets provides significant cash flows as well as organic growth potential through identified projects.

In addition, FTAI believes that there are a large number of acquisition opportunities in its target sectors and that its Manager’s expertise and business and financing relationships, together with its access to capital, will allow FTAI to take advantage of these opportunities.

FTAI is externally managed by FIG LLC, an affiliate of Fortress, which has a dedicated team of professionals who collectively have acquired over $17 billion in transportation-related assets since 2002.

As of December 31, 2014, FTAI had total consolidated assets of $1,404.2 million and total equity capital of $713.5 million. FTAI intends to pay regular quarterly dividends from cash available for distribution.

FTAI believes that market developments around the world are generating significant opportunities for the acquisition of infrastructure and equipment essential to the transportation industry.

Global trade growth has consistently outpaced global GDP growth over the last three decades and has fueled a large and growing demand for both cargo and passenger-related transportation infrastructure and equipment.

At the same time, significant market dislocations are providing tremendous new investment opportunities. Traditional capital providers such as governments and European banks are not keeping pace with the need for long-term capital to support the industry, and FTAI believes this shortage will continue for years to come. FTAI believes that these factors will enable FTAI to acquire attractive assets and continue to grow its business.

FTAI’s operations consist of two primary strategic business units—Infrastructure and Equipment Leasing. FTAI’s Infrastructure Business acquires long-life assets or operating businesses that provide mission-critical services or functions to transportation networks and typically have high barriers to entry, strong margins, stable cash flows and upside from earnings growth and asset appreciation driven by increased use and inflation.

FTAI’s Equipment Leasing Business acquires assets that are designed to carry cargo or people or provide functionality to transportation infrastructure. Transportation equipment is typically long-lived, moveable and leased by FTAI to companies that provide transportation services on either operating leases or finance leases.

FTAI’s leases generally provide for long-term contractual cash flow with high cash-on-cash yields and may include structural protections to mitigate credit risk.

FTAI believes that its existing asset base provides stable cash flow generation with over half of its revenue contracted and the remainder coming from markets with stable or growing demand outlook. FTAI currently expects to generate approximately $140 million in contracted cash flow in 2015 from its existing assets.

Fortress Transportation and Infrastructure Investors Ltd. Intellectual Property

Nothing.

Fortress Transportation and Infrastructure Investors Ltd. Competition

The business of acquiring, managing and marketing transportation and transportation-related infrastructure assets is highly competitive. Market competition for acquisition opportunities includes traditional transportation and infrastructure companies, commercial and investment banks, as well as a growing number of non-traditional participants, such as hedge funds, private equity funds, and other private investors.

Additionally, the markets for FTAI’s products and services are competitive, and FTAI faces competition from a number of sources.

These competitors include engine and aircraft parts manufacturers, aircraft and aircraft engine lessors, airline and aircraft services and repair companies, aircraft spare parts distributors, offshore services providers, maritime equipment lessors, shipping container lessors, container shipping lines, and other transportation and infrastructure equipment lessors.
FTAI competes with other market participants on the basis of industry knowledge, availability of capital, and deal structuring experience and flexibility, among other things.

FTAI believes its Manager’s experience in the transportation and the transportation-related infrastructure industry, and its access to capital, in addition to its focus on diverse asset classes and customers provides a competitive advantage versus competitors that maintain a single sector focus.

Fortress Transportation and Infrastructure Investors Ltd. 5% Shareholders Pre-IPO

Fortress Worldwide Transportation and Infrastructure Investors LP        90.0%

FTAI Offshore Holdings L.P.      10.0%  

Fortress Transportation and Infrastructure Investors Ltd. Dividends

FTAI currently intends to pay regular quarterly dividends and to maintain a payout ratio of between 50-60% of cash flows available for distribution, with remaining amounts used primarily to fund its future acquisitions and opportunities.

For the second quarter of 2015, FTAI intends to pay a dividend of $0.33 per share, which will be pro-rated for the period from the consummation of this offering to the end of the quarter and paid in the third quarter of 2015.

Fortress Transportation and Infrastructure Investors Ltd. Use of Proceeds

FTAI expects to receive $371 million from its IPO and use it for the following:

The acquisition of new assets in the sectors in which FTAI currently invests—aviation, energy, intermodal transport and rail—as well as to opportunistically acquire assets across the entire transportation and transportation-related infrastructure and equipment market.

In addition, FTAI intends to use the net proceeds for follow-on investments in its existing assets, working capital and other general corporate purposes.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

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