Two days from a mandatory redemption, Brightline Florida is working to close a $985 million borrowing that would roll over existing bonds with additional security liens and substantially higher yields.
The refinancing of Brightline's so-called commuter bonds is set to price this week with a nearly 15% yields. The underwriting team, led by Morgan Stanley, has asked holders to extend the Aug. 13 deadline to Aug. 15, according to an investor who declined to participate in the deal.
As of Monday morning, roughly $7.5 million of the $985 million had yet to be placed, the investor said. Some of the smaller holders were not yet on board with the rollover, according to a second investor.
The bonds feature a 10% coupon with a mandatory put on June 15, 2026 at $104.25, putting the approximate yield on the put date at 14.891%.
The holders of 85% of the principal amount of the existing bonds, some of whom have retained legal counsel, negotiated fresh security terms as a condition to participate in the new borrowing, according to a Friday supplement to the preliminary official statement.
First Eagle Investment Management and Nuveen are top holders of the bonds. First Eagle referred media questions to Herbert Smith Freehills Kramer LLP. Nuveen did not respond to a request for comment.
The additional security liens would give all commuter bondholders a second-lien pledge on debt issued for Brightline's planned expansion to Tampa as well as a second lien on the common equity interest in
If within 60 days of the coming remarketing date, the borrower is not able to provide the Brightline West second-lien pledge or has not prefunded an amount equal to the interest and premium, the scheduled mandatory tender would be accelerated to Oct. 28, according to bond documents. If the borrower satisfies the conditions, the scheduled mandatory tender will revert to June 2026.
Brightline West faces its own mandatory redemption deadline of 90 days after Aug. 31 to secure a $6 billion bank facility per the terms of its
The $985 million Aug. 13 redemption is for Brightline Florida's commuter bonds, which carry an 8.25% coupon and a $104.25 mandatory put on Aug. 13. The company has rolled over the debt several times while it negotiates with southern Florida counties to develop commuter services along Brightline's corridor in exchange for payments.
In May, Brightline Florida suffered a series of ratings downgrades due to underperformance, and in July, the company raised red flags by
The latest downgrade came Friday from S&P Global Ratings, a two-notch cut that dropped $2.22 billion senior secured tax-exempt private activity bonds — the so-called opco debt — to BB-minus from BB-plus with a negative outlook. S&P has a AA rating on the $1.1 billion bonds guaranteed by Assured. The senior debt of Brightline East LLC — so-called parentco debt — is rated CCC-plus with a negative outlook.
"The negative outlook reflects that the next 12 months are critical for Brightline's performance," S&P said.
In another pressure point, the Florida East Coast Railway last month sued Brightline saying the commuter service violates existing agreements and threatens its freight operations.
Updated bond documents note that if FECR "were to prevail in any such legal proceedings, it may negatively impact the South Florida Commuter Rail Project and the project owner's reputation, business, results of operation, financial condition and liquidity." Brightline on July 29 filed a motion to dismiss and compel arbitration in response to the FECR lawsuits.
The investor who declined to participate in the refinancing, who has less than 1% exposure to the project, said the company has not communicated about the deferred interest payment, the commuter contracts with the counties or raising fresh equity.
"Without the equity raise, this project has a leverage problem and will need to be restructured," the investor said. "We really don't really have too much of a vested interest in the project's success when compared to the other large bondholders who really do need this project to work out for the sake of their funds."
One of the most closely followed credits in the high-yield municipal bond market, Brightline Florida owns and operates a 235-mile intercity high-speed passenger rail service connecting Miami to Orlando, with plans for an extension to Tampa. The company's $5.5 billion debt stack features several liens, taxable and tax-exempt structures and separate holding, operating and parent company entities.
Morgan Stanley declined to comment and Brightline did not respond to requests for comment.
