Florida's struggling passenger train Brightline
A group of majority bondholders and Assured Guaranty, Ltd have agreed to provide $490 million of long-term capital and $258 million in post-petition financing to the operating company under a Restructuring Support Agreement announced as part of the bankruptcy.
The operating company will remain outside the bankruptcy, allowing the train to continue to run.
The filing comes after years of weaker-than-projected ridership that failed to generate sufficient revenue to cover operations and service the company's substantial $5.5 billion debt load. The Fortress-backed company has spent the last year delaying debt payments while negotiating with creditors and trying unsuccessfully to secure additional financing.
With $4.4 billion of muni debt, Brightline is one of the largest credits in the high-yield market. Its bonds are relatively concentrated in the hands of a few owners, which include Assured, which wraps a majority of the senior debt.
Brightline Holdings LLC and certain other parent entities filed for the bankruptcy, listing assets and liabilities of between $1 billion and $10 billion in the
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Assured and others have also agreed to provide $258 million of post-petition funding to the operating company during the bankruptcy process.
The $490 million includes $140 million of senior debt — $70 million provided by Assured — and $350 million of new junior debt provided by other bondholders. With the $70 million of senior debt, Assured will retain its controlling position.
Assured said in a statement late Thursday that the $140 million of senior debt will be pari passu with the operating company's existing senior debt, which totals $2.2 billion.
The new capital would be used to support ongoing operations and "help position [the train] for long-term stability and success, in addition to repaying the post-petition financing."
The $258 million of post-petition financing will be provided to the operating company by Assured and other bondholders. Assured is providing up to $178 million of that. The money, which is also at the same level as the existing Opco senior debt, will be repaid with the exit financing.
Under the restructuring support agreement, the $2.2 billion of senior muni bonds will remain in place and the roughly $1.2 billion of junior unrated muni debt and $985 million of so-called commuter bonds will "remain outstanding, with no reduction in aggregate principal amounts, through the restructuring," Brightline said in an announcement late Thursday.
Assured and other bondholders have agreed to a "limited deferral of scheduled interest payments on its uninsured and insured senior bonds held by such bondholders in exchange for a fee" paid by the operating company, which will offer the same interest deferral option to all senior bondholders, Assured said.
"With respect to insured bonds, AG will guarantee the timely payment of the deferred interest when due under the deferral for those bondholders electing to defer, and will continue to guarantee the timely payment of interest as originally scheduled for those bondholders not electing to defer," the insurer said.
The restructuring is subject to the bankruptcy court's review and approval. The lead debtor in the case is an entity called FIHPNP LLC, with 17 additional affiliated debtors, according to court filings. The debtors on Friday asked the court for joint administration of the cases.
"We view the RSA as a constructive development for Brightline and its tax-exempt bondholders," said John Miller, head of municipals at First Eagle Investments, in a statement Friday.
"The agreement preserves the par value of the tax-exempt debt, keeps the related collateral outside Chapter 11 and provides meaningful new liquidity to support the company's continued operational progress. For First Eagle, the outcome reflects the importance of rigorous credit research and active engagement in seeking to preserve long-term value for shareholders."
Roughly $1.19 billion of corporate notes held by a group of hedge funds will be on the chopping block in the bankruptcy.
Below the $2.2 billion of senior muni debt is $1.2 billion of unrated tax-exempt debt, issued by AAF Operations Holdings LLC, that is secured by a proposed extension to Tampa.
Somewhat separate from the rest of the debt stack is $985 million of commuter bonds issued by Brightline Florida Holdings LLC that are secured by commuter rail access rights and equity interests in the Miami-Dade, Broward, and Palm Beach commuter entities.
Brightline said in a statement that it would continue to pursue "multiple growth initiatives," including the commuter rail service and expansion to Tampa.
All the bonds except the insured senior paper trades at distressed prices. None of the bonds had traded as of Friday morning.
The RSA and bankruptcy would "significantly deleverage Brightline's balance sheet and greatly improve liquidity," Brightline said.
"Today's agreement brings $490 million in new long-term capital to Brightline from the stakeholders who know this business, and it comes at a time of real momentum," said Patrick Goddard, Brightline Florida CEO. "This transaction will be a catalyst for further growth in ridership and revenue. We are grateful to our creditors, advisors, vendors, teammates, and guests for their confidence throughout this process, and we look forward to the bright future ahead."
Brightline
In April 2024, Brightline sold
Skadden, Arps, Slate, Meagher & Flom LLP and Cole Schotz LLP are serving as legal advisors to Brightline.
Perella Weinberg Partners LP and Houlihan Lokey Capital, Inc. are serving as Brightline's investment bankers, and Alvarez & Marsal North America, LLC is serving as Brightline's financial advisor.
Milbank LLP and Lazard Inc. are advising Assured Guaranty. Herbert Smith Freehills Kramer (US) LLP and GLC Advisors & Co., LLC are advising the ad hoc mutual fund group.
