Florida passenger train Brightline, one of the largest and most closely-watched credits in the high-yield municipal bond market, filed for Chapter 11 bankruptcy Thursday night in the United States Bankruptcy Court for the District of New Jersey.
The bankruptcy marks the largest municipal market restructuring in years.
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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 petition.
The financing includes $140 million of additional senior debt and $350 million of new junior debt.
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 $1.13 billion of the senior debt.
Under the restructuring support agreement announced late Thursday, 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," the company said in an announcement late Thursday.
The RSA and bankruptcy would "significantly deleverage Brightline's balance sheet and greatly improve liquidity," the company 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."
Assured Guaranty, which wraps $1.13 billion of the $2.2 billion of senior bonds, said in a statement that the insurer, along with other financial stakeholders, has also agreed to provide the operating company $258 million of post-petition funding during the bankruptcy process.
"Separately, OpCo and specific 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 OpCo; OpCo 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."
Assured's "commitment to insured bondholders remains unwavering, while it continues to focus on protecting its rights, mitigating potential losses and working toward outcomes that support the interests of the parties involved," the insurer said.
Brightline said it would continue to pursue "multiple growth initiatives," including the commuter rail service and expansion to Tampa.
The news comes as little surprise to the muni market, which has followed the travails of the struggling company for more than a year as it delayed bond payments and tried to secure additional financing.
"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.
"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."
Another $1.19 billion of corporate notes held by a group of hedge funds will be on the chopping block.
Below the senior Opco bonds are $1.2 billion of unrated tax-exempt 2024 bonds, issued by AAF Operations Holdings LLC.
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.
