Florida’s Brightline passenger train is making waves in the high-yield municipal market as it gears up for its investment grade market debut with a $2 billion deal. This marks a significant step in the company’s efforts to overhaul its debt load and increase investor interest in its operations.
The upcoming $2 billion investment-grade deal by Brightline is set to include another $1 billion of subordinate high-yield bonds that will be a mix of taxable and tax-exempt offerings. The finance team, led by Morgan Stanley, is actively engaging with investors and conducting meetings to discuss the transactions, aiming to appeal to a broad retail base. The inclusion of Assured Guaranty insurance in up to $1 billion of the deal is expected to enhance its retail appeal and broaden the investor base.
Brightline Trains Florida LLC operates a $6 billion, 235-mile private passenger intercity express system from Miami to Orlando. The company has been in operation since 2018 and has been a significant player in the speculative-grade project finance market. With an extension to Orlando airport and plans for further expansion to Tampa, Brightline is poised for growth in Florida’s fast-growing economy.
Brightline’s goal with the upcoming bond offerings is to refinance roughly $3.5 billion of outstanding senior debt. The restructured capital stack will consist of a mix of senior and subordinated taxable and tax-exempt bonds, as well as taxable senior and subordinated notes and equity. Parent company Fortress Investment Group has already contributed $2.2 billion of equity, representing a sizable portion of the capital structure.
The investment-grade ratings assigned to Brightline’s senior debt are supported by a conservative debt structure, ample liquidity, and ridership projections. Despite lower ridership estimates compared to the company’s projections, analysts from Fitch Ratings and S&P Global Ratings have assigned a BBB-minus/stable rating to the debt. The project’s resilience, especially during the pandemic, has instilled confidence in investors and ratings agencies alike.
Brightline’s proposed extension to Tampa and its parent company’s development of the $12 billion Brightline West electric train project between California and Las Vegas highlight the company’s ambitious growth strategy. With federal grants and private activity bond allocations secured for future projects, Brightline is setting the stage for further expansion and success in the passenger train market.
Florida’s Brightline passenger train is on the brink of a new chapter with its investment grade market debut and debt restructuring efforts. With a focus on financial stability, operational growth, and market appeal, Brightline is poised to cement its position as a key player in the passenger train industry.