January 31, 2014 / 6:35 PM / 4 years ago

UPDATE 1-Shares of debt-heavy Intrawest Resorts fall in debut

(Adds details, analysts’ comments, updates share movement)

* Shares open at $11.11, below IPO price $12

* Shares hit low of $10.80

By Neha Dimri

Jan 31 (Reuters) - Shares of Intrawest Resorts Holdings Inc fell as much as 10 percent in their debut on Friday, as the mountain resort operator’s heavy debt deterred investors in a weakening U.S. market.

The company’s shares opened below its initial price of $12.00 per share and fell to a low of $10.80 on the New York Stock Exchange. The expected price range was $15-$17.

Four out of six companies, including home builder New Home Co LLC, made strong market debuts in a weak U.S. market on Friday.

U.S. stocks dropped more than 1 percent on Friday and were set for their first monthly decline since August, hurt by weaker-than-expected inflation data in the euro zone and ongoing concerns about turbulence in emerging markets.

The recent volatility in the markets have not affected the ability of firms to go public in general, said Josef Schuster, founder of IPOX Schuster, a Chicago-based IPO research and investment house.

Intrawest, owned by private equity firm Fortress Investment Group LLC, has not posted a net profit for the last three years, mainly due to interest payments on its debt, which was $1.95 billion as of June 30.

At the offer price, Intrawest was valued at $540 million.

“I think the market is also getting more sensitive to where IPO proceeds go to, and favors firms where proceeds are earmarked for growth versus reducing leverage or going to selling shareholders,” Schuster said.

Intrawest’s IPO raised $187.5 million through the sale of 15.6 million shares.

The company’s only stockholder is Fortress-controlled Intrawest Europe Holdings SARL, which sold 12.5 million shares in the offering, diluting its stake to 65.3 percent.

The rest of the shares were sold by the company, which has interests in seven mountain resorts in North America, including Steamboat Ski and Resort and Mont Tremblant.

Denver-based Intrawest has warned that its loss widened and that revenue could have fallen as much as 4.5 percent in the three months ended Dec. 31.

“The company is losing money and there is no future visibility of increased earnings. Markets like companies which have topline revenue growth visibility,” said Francis Gaskins, a partner at IPO research company IPODesktop.com.

Founded in 1976, Intrawest offers skiing, mountaineering and hiking and operates Club Intrawest, a private vacation club with eight locations across the United States, Canada and Mexico.

Intrawest, which also owns Canadian Mountain Holidays, the largest heli-skiing adventure operator in the world, was taken private by Fortress in 2006 for about $2.8 billion, including debt.

Intrawest is headed by 65-year-old William Jensen, who previously served as chief executive of resort operator Whistler Blackcomb Holdings Inc.

Goldman, Sachs & Co, Credit Suisse Securities (USA) LLC, Deutsche Bank Securities Inc and Merrill Lynch, Pierce, Fenner & Smith Inc were the lead underwriters to the offering. (Additional reporting by Aman Shah; Editing by Maju Samuel and Savio D‘Souza)

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