Three Trucking Fleets Plan Share Offerings as a Way to Raise Funds to Reduce Debt

This story appears in the Aug. 23 print edition of Transport Topics.

The decisions by three trucking fleets to announce public share offerings in recent weeks represent a sharp change in direction for an industry that went more than five years without a stock sale.

New Century Transportation Inc. said on Aug. 11 it plans to raise $120 million through an initial public offering. Five days earlier, Panther Expedited Services Inc. said it is seeking $100 million.

Swift Transportation’s management, based in Phoenix, started the recent surge on July 22, seeking to raise $700 million. All of the carriers said the proceeds of their offerings would be focused on debt repayment.

“Companies are going out at a good time to put stock on the market and get rid of some debt,” said Richard Mikes, a partner at Transport Capital Partners in Sanibel Island, Fla. “These companies believe they have enough attraction in the market to go public at a time when the market for trucking stocks is still attractive.”

Mikes noted that tight credit markets also are a factor in a decision to make an initial public offering.

“Selling stock is one way to grab capital instead,” he said.

Three months ago, Roadrunner Transportation Systems Inc., Cudahy, Wis., restarted the long-dormant trucking IPO market, making the first stock sale by a fleet since Universal Truckload Services Inc. in February 2005 (5-24-10, p. 4).

Earlier in August, Roadrunner reported a $5.6 million profit for the second quarter, excluding charges, and posted a 93.3 operating ratio at its largest unit.

John Burton, vice president at Americas Commercial Transportation Research Co., Columbus, Ind., said stronger industry performance was fueling the IPO trend.

“The truckload sector looks to be pretty strong going out over the next three to six quarters because capacity is expected to remain tight, even if the economy doesn’t improve significantly,” Burton told Transport Topics. “If there is a safe place in the market, it is that sector.”

The Securities and Exchange Commission must approve each offering before a company can extend it to the public.

New Century, Westampton, N.J., focuses on less-than-truckload freight consolidated in the Philadelphia area and truckload shipments back to that area.

“We are a growth-oriented motor carrier using a differentiated load-to-deliver operating model that combines the higher revenue-per-tractor characteristics of a less-than-truckload carrier with the operating flexibility and lower fixed costs of a service-sensitive truckload carrier,” New Century said in its filing.

Its revenue rose 11% to $61.8 million for the first three months of 2010, and operating income was $1.03 million, reversing a $791,000 loss in first quarter of 2009.

The company had an $8.54 million first-quarter loss resulting from a $7.5 million charge for reduced stock warrant value.

New Century wants to use funds for debt repayment, including a term loan due next year, and notes due in 2012, 2013 and 2014 with interest rates of up to 14%, according to the filing.

The company’s debt totals $102.7 million, as of March 31.

For Panther, Seville, Ohio, the current filing is the second time it has contemplated an IPO. An earlier registration statement filed in June 2006 was withdrawn.

Its service is provided by 1,075 owner-operators, who haul for Panther exclusively, as well as third-party truckers and air and ocean services.

Panther in the first six months of 2010 increased sales by more than 40% to $95 million from $66.4 million. Its net loss was $4.9 million, resulting from $8 million of interest expense. First-half profit before interest and taxes was $284,000.

In the first half of last year, the company lost $37.8 million, primarily because of a goodwill impairment charge of $33.8 million.

Panther currently has $64.3 million due on its secured credit facility in December of next year and is paying 9.25% interest on a portion of that facility. It also owes $46.5 million on notes paying 17% interest that are due in July 2012.

Fenway Partners Inc., a New York investment company, owns 76% of Panther. It would be the largest shareholder after shares are sold.

Swift has been privately held since 2007, when founder Jerry Moyes took it private in a $2.5 billion deal.