BRADENTON, Fla. - The Florida firm behind a planned private intercity passenger train system plans to sell $1.75 billion of private activity bonds in the next few months, according to federal court documents.
All Aboard Florida said the offering will go forward "as market conditions are expected to improve" with the Florida Development Finance Corp. as the conduit issuer.
The market update was in a brief filed in response to lawsuits by two Florida counties opposing the U.S. Department of Transportation's tax-exempt PAB allocation.
The USDOT and All Aboard Florida filed motions to dismiss the federal suits on Tuesday.
AAF said it circulated a preliminary limited offering memorandum in August, followed by three supplements, as it attempted to complete the transaction last year.
Changing market conditions and the Fed's pending interest rate hike "rendered the terms on which a deal could be concluded with investors less than optimal," the company said in the brief.
"AAF both intended and expected to complete the transaction, but ultimately chose not to conclude a deal with investors," the company's filing said.
Part of the brief was based on a declaration by Kenneth J. Nicholson, a managing director of Fortress Investment Group LLC, which owns All Aboard Florida and Florida East Coast Railway.
The planned train service, recently branded as Brightline, is expected to start running from Miami to West Palm Beach in early 2017 on the existing Florida East Coast line, while a new spur will be built to Orlando with service starting in late 2017. Work on the project is underway.
It will be the first private intercity passenger train operation in the United States for more than three decades.
The 32 daily trains will travel through heavily populated areas of Martin and Indian River counties where no stops are planned.
The counties filed separate suits challenging the PABs last year contending that the bond allocation was improperly approved before a separate federal review under the National Environmental Policy Act was completed.
The counties also cite negative project impacts such as increased traffic congestion, and potential delays for ambulances and first responders at numerous crossings.
The USDOT said the suits should be dismissed because the NEPA does not apply to its bond allocations and the counties lack standing to proceed.
The agency's brief said the counties cannot demonstrate that the injuries they claim will occur are related to the PAB allocation because AAF plans to proceed with the project regardless of whether tax-exempt financing can be used.
"If AAF is unable to consummate a PABs transaction for any reason, it will finance the completion of the project through one or more other available sources of financing," said Nicholson's statement accompanying the motion filed by AAF.
Nicholson, who oversees management of investments in Fortress' private equity funds, said other financing options include a low-interest loan from the Railroad Rehabilitation and Improvement Financing program, equity contributions, selling equity interests, and conventional financing such as the $405 million in notes sold in 2014 and $250 million recently obtained in a private loan.
AAF has applied for a $1.6 billion loan RRIF loan.
As part of the NEPA process, the final environmental impact statement for AAF was released last August.
However, that process typically concludes with "record of decision" signed by an agency official clearing a project to proceed and obtain necessary permits.
Once the ROD is released, lawsuits can be filed challenging the federal review process.
Opponents of the project have expressed frustration over the length of time it has taken to issue the ROD.
On Jan. 7, the U.S. Army Corp. of Engineers – one of the federal agencies participating in the NEPA process – said in a letter that it refused to issue a permit to AAF until the record of decision is released.
Indian River County is hiring outside legal counsel to determine if there are avenues to challenge permits sought by AAF.
"We saw that letter with interest," said Martin County senior assistant attorney Amy Taylor Petrick. "We are playing close attention to the permit applications and trying to make sure the regulatory agencies have the correct data."
Petrick said she plans to address the County Commission in February about permit requests by AAF, and legal strategy the county intends to pursue this year.