Brightline Florida's privately operated express train last week won an eight-month reprieve on a looming mandatory tender on $985 million of so-called commuter bonds by granting the holders a subordinate equity lien in a planned bullet train between Nevada and California.
The move gives Brightline Florida breathing room as it tries to boost ridership on its main rail line.
Securing the junior lien pushes back the tender date to June 14, 2026, according to an
Meanwhile, Brightline West, which is building a 218-mile bullet train between Las Vegas and Los Angeles, faces its own mandatory redemption deadline in late November per the terms of a
The company has floated to investors the idea of a debt exchange, according to two sources familiar with the talks. Some of the bonds may be taken out and bondholders offered new debt, likely on better terms, the sources said.
An investor who holds Brightline West bonds said the Florida commuter bond resolution bodes well for the West Coast project.
"We think that the focus will now be on solving for the mandatory redemption. There is a chance that the mandatory redemption timeline could be extended, but we should know more soon," the investor said.
Another key date will be a Jan. 15 coupon payment on Brightline Florida's unrated tax-exempt bonds or so-called "third lien bonds." Secondary-market prices on those bonds have dropped sharply over the last several months. Roughly $1.4 million of the bonds traded hands Thursday at 50 cents. That's down from 102.75 on May 13, according to EMMA.
The commuter bonds that were the focus of the latest Florida negotiations feature a 10% coupon with a mandatory put on June 15, 2026 at $104.25, putting the approximate yield on the put date at nearly 15%. The company has rolled over the debt several times while it negotiates with Miami-Dade, Broward and Palm Beach counties to develop a commuter rail line along Brightline's corridor in exchange for payments.
A small chunk of the commuter bonds traded in September at par.
The Brightline West bonds have seen their price improve after falling earlier this year. A 9.5% bond due in 2065 bonds traded on Oct. 20 for 72 and as of Oct. 30 had climbed back up to 80.
Brightline Florida's $5.5 billion debt stack features several liens, taxable and tax-exempt structures and separate holding, operating and parent company entities. The $985 million of commuter bonds are secured by a separate revenue source and "off to the side" of the rest of the capital stack, noted a bondholder who holds other parts of the Florida project.
But the pressure and headlines surrounding the commuter bonds could impact the larger credit, the holder said. "It's noise, and that in and of itself is a bit of a pain if you're a bondholder in other parts of the Florida structure," the investor said. "Markets react to noise."
In contrast, tying the West and East Coast train projects together, even in an indirect way with a junior equity lien, may behoove all holders, the investor said. "Yes, these are two different entities but they're still kind of competing for the same dollars from the same equity participants, so it could make for a cleaner negotiation process" for bondholders if they find themselves in a fight with the sponsor, the investor said. "It could take some of the complication out of it."
The junior lien is not likely to impact current Brightline West bondholders' positions, said the first Brightline West investor. "For better or worse, it solidifies a connection between the two projects that wasn't there before beyond sharing the same sponsor," the investor said.
Fortress Investment Group owns both projects.
Brightline West in September
While Brightline West works to put together financing for its $21.5 billion project, the Florida line remains under pressure from slower-than-projected ridership.
Over the summer Brightline Florida suffered a series of ratings downgrades due to underperformance, and in July, the company raised red flags by
First Eagle Investments, BlackRock, Invesco and Alliance Bernstein are large Brightline West holders.
First Eagle, Nuveen, Invesco, BlackRock and Macquarie are among the largest Florida holders.
