Brightline Florida plans to tap debt reserves to cover a January payment on a chunk of its subordinate bonds after it deferred its last debt payment.
The company's move in July
"The company expects to use a portion of the reserves in the debt service reserve account to fund, in full or in part, the interest payment due on the Brightline Trains Florida series 2024 bonds on January 1, 2026," Brightline said in a
The notice also said the company is considering taking on up to $100 million of additional debt for liquidity purposes — which would likely require bondholder consent.
Brightline also reiterated that it continues to try to raise "substantial equity" that would be used in part to pay off high coupon debt and increase cash reserves.
Brightline Trains Florida LLC owns and operates a $6 billion, 235-mile train system from Miami to Orlando that has long been one of the high-yield muni market's most volatile credits. In 2024, the company restructured its large and complex capital stack in a borrowing that restructured $4.5 billion of debt across three liens, with a mix of taxable and tax-exempt debt featuring subordinate and senior liens and $1.33 of debt insured by Assured Guaranty.
Fortress also owns the West Coast's Brightline West, which is building what it hopes will be the country's first electric high-speed train. Brightline West is also
The next several months will prove crucial for both projects.
Brightline Florida's July decision to defer the interest payment on $1.2 billion of unrated subordinate debt rattled the market. The next debt payment on the subordinate debt, which carry 12% and 10% coupons, is due on Jan. 15. The company is allowed under its bond indenture to make three deferrals and, after pulling that lever in July, now has two remaining.
Brightline did not respond Tuesday to a request for comment about whether it plans to make the debt payment, but posted the EMMA notice late Tuesday.
One of the passenger train's largest investors remains bullish on the credit despite its recent struggles.
"I think that if you look at the fundamentals of what's happening it's not as dramatically negative as what those [bond] prices have implied," said John Miller, head and chief investment officer of the municipal credit team at First Eagle Investments.
"Going forward can we expect some recovery? Yes, I think we can, in particular on the operating front and the financial picture."
If the company is able to raise additional money, it will likely use that money to take out some of the subordinate bonds that have suffered the largest price drop, Miller added. The company seemed to confirmed that in the EMMA notice, saying that an equity raise, if successful, "would be used to repay principal and interest of existing higher-coupon indirect parent entities' debt of ours and to increase cash reserves."
The subordinate bonds were trading at 106.8 in March. After July they dropped to 33, and that's largely where they have remained, with $1 million of the bonds trading hands on Dec. 3 at that price.
Miller said he thinks the markdowns are "pretty extreme," and notes that it's based on relatively light trading.
"The volume traded is tiny compared to the volume being held by more strategic long-term holders," he said. "There's limited volume but what volume is there is more attractive to purchase than to sell."
In its notice, Brightline said that November ridership was up 14% compared to November 2024 and total revenue up 18% compared to the year-earlier period. The month saw records in long-distance revenue, ancillary revenue, total rides and long distance rides, the company said.
Miller is projecting that Brightline Florida could be cash-flow positive in the near future. "We could recoup the underperformance and then some," he said.
