Fitch Ratings downgraded Brightline Trains Florida LLC's $2.22 billion senior secured private activity bonds to BB-plus from BBB-minus and downgraded Brightline East LLC's $1.12 billion in senior secured taxable notes to CCC-plus from B.
Fitch placed the securities on credit watch negative.
The downgrades stem from a weaker than expected ridership ramp up for the startup passenger train system, lower than expected fares, higher than expected operating costs and a "significant spend down of the project's liquidity accounts."
The Brightline operating company's liquidity has decreased to $310 million as of March 31 from $559 million as of May 2024, Fitch said. The agency expects additional draws on Brightline's "ramp up reserve" account in the next few years.
Fitch now expects substantially less ridership, lower prices, lower ancillary service revenue and elevated costs compared to Brightline's projections. As a result, Fitch expects an average debt service coverage ratio of 1.8X from 2026 to 2035, with a minimum of 1.1X in 2026.
Fitch noted that while Brightline is free to set rates at whatever level it chooses, its proposed fares are high compared with other transportation modes.
Brightline's fiscal 2024 performance had an operating loss of $63 million rather than Fitch's expected $3 million loss, Fitch said.
The PABs, issued through the Florida Development Finance Corp., have a final maturity in 2053 and pay only interest through 2032.
The notes' debt is "structurally subordinate" to the bond debt.
Fitch said current projections for the notes indicate they will default in 2027 due to a lack of cash from the Brightline operating company.
Brightline currently provides rail service between Miami and Orlando but ridership data to Orlando, which opened in 2023, is limited, Fitch said.
Brightline didn't immediately respond to a request for a comment.
The downgrade comes a few days after
"We do not have a rating on Assured Guaranty so our underlying rating is the only rating we had assigned and currently monitoring," Fitch said.
KBRA rates the bonds BBB with a stable outlook.
The Brightline deal won The Bond Buyer's 2024
