Brightline Florida bondholders Wednesday agreed to another payment extension, giving the struggling train line just over one week of breathing room to cover the latest overdue debt payments.
The brief grace period was granted by holders of the $1.2 billion of subordinate, or AAFO Holdings, municipal bonds and $985 million of "commuter" bonds. The move was expected by many market participants, who call the ongoing delays a "pretend and extend" exercise while Brightline tries to figure a way out of its liquidity crunch.
The company also failed to make required sinking fund payments into the two bond funds, according to a Thursday
It's the 13th amended indenture for the commuter bonds, and the fourth for the AAFO bonds, according to filings.
"There are many project financing-type situations in the muni market where you just don't see any long-term viability," the investor said. "Here, if you can wait it out, there's viability. So the question is can you get enough liquidity in there to wait it out."
The Fortress Investment Group-backed company operates a 235-mile train in Florida that's the nation's only privately owned intercity rail line. Saddled with $5.5 billion of debt and revenue performing under projections, the company has spent the last year trying to raise new financing.
The July 15 AAFOH interest payment is now due on July 24. The commuter bonds' mandatory redemption is pushed to July 23 from July 14. The commuter bond interest payment is now due on July 24, pushed back from July 15.
Brightline was expected to trigger a third — and final — deferred interest option for the July 15 AAFO payment but apparently has not yet pulled that trigger. One legal analyst said the bond documents could be interpreted to mean the third deferral marks a default, as opposed to the larger market understanding that the company has three deferral options before a default would kick in.
Brightline will be required to pay interest at a step-up rate because it failed to make the sinking fund installment on the bonds, the EMMA filing said.
Meanwhile, Fitch Ratings on Tuesday downgraded the senior Opco bonds, which total $2.219 billion, to CC from CCC and removed the rating watch negative. It also affirmed the CC rating on $1.119 billion of taxable corporate notes.
"The rating reflects a very high probability that both issuers will be unable to fully fund the next debt service payments due on or before Jan. 1, 2027," Fitch said, adding that the reserve accounts for both sets of bonds were "substantially depleted" to meet the July 1 payments.
The July 1 payments covered the Opco bonds, of which $1.13 billion is wrapped by Assured Guaranty Ltd., and the subordinate taxable notes. The next deadline is Jan. 1, 2027.
"Management is pursuing several action plans to enhance reserves available for funding operations and adding debt repayment protection, including additional debt borrowings and/or third-party equity funding. Fitch will monitor such developments to assess the changes to the default risk profile," analysts said.
Fitch noted the issuance of additional debt is subject to rating affirmation by the agencies that rated the original senior muni bond transaction. "This offers some bondholder protection should the project pursue regearing for potential expansion in the future," Fitch said. Additional senior muni debt would further subordinate the taxable bonds, analysts said.
The subordinate AAFOH bonds last traded in January at 36.
The commuter bonds' last trade, also in January, was at 63.
An odd lot of the uninsured senior Opco bonds sold at 62.25 on July 9.
A $4.2 million chunk of the senior Assured-wrapped bonds sold at par on Wednesday.
