BRADENTON, Fla. - The federal government extended All Aboard Florida's $1.75 billion private activity bond allocation, relieving pressure on the private passenger train developer to issue the bonds as legal challenges proceed.
Along with two pending federal lawsuits opposing the bond allocation, a potential new legal hurdle developed this week.
Florida's Indian River County on Tuesday authorized taking legal action against the Florida Development Finance Corp. if the agency approves the bond sale for the All Aboard Florida project. FDFC has agreed to be the conduit issuer.
FDFC has canceled two meetings to consider the bond resolution, citing various conflicts. As of Tuesday, the meeting had not been rescheduled.
However, All Aboard owner Fortress Investment Group LLC now has a six-month window to issue the U.S. Department of Transportation-approved PABs by Jan. 1, the Federal Railroad Administration said Wednesday.
The original PAB allocation set the issuance deadline as July 1.
"We are pleased the U.S. Department of Transportation approved an extension for our PAB allocation," All Aboard said in a statement. "We will continue to move forward with our project that will transform mobility in our state and provide hundreds of millions of dollars in economic activity."
All Aboard Florida plans to use the $1.75 billion in tax-exempt PABs to finance portions of the $3.5 billion, 235-mile, inter-city train system that will link Orlando and Miami, with stations in West Palm Beach and Fort Lauderdale.
While the USDOT's bond allocation has been extended, stipulations attached to the original allocation, granted Dec. 22, 2014, remain in effect, according to the FRA.
One stipulation prohibits bond proceeds from being used until 45 days after the release of a long-anticipated final environmental impact statement.
All Aboard has declined to provide details about its financing.
However, it appears that train sponsors plan to issue the debt and place the proceeds in escrow, according to documents obtained by The Bond Buyer that were prepared for a June 10 meeting of the FDFC that was canceled.
The USDOT private activity bond allocation also requires that the project be constructed in accordance with federal requirements designed to minimize impacts on the environment.
The FRA is finalizing the environmental impact statement required by the National Environmental Policy Act.
There is no release date for the final environmental impact statement, the FRA said Wednesday.
The agency received thousands of comments on a draft version of the document, and has been conducting a review since a comment period ended in early December.
In a federal court hearing last month, All Aboard attorney Eugene Stearns said that the project's sponsors did not want to seek an extension of the bond allocation.
The company will include any protective elements required by the environmental impact statement into the final project costs, though it has yet to find out what they might be, said Stearns, a shareholder in the Miami office of Stearns Weaver Miller Weissler Alhadoff & Sitterson.
All Aboard has been told that the environmental impact statement would be released over the past few months, and then the time frame turned to "next week, next week, next week, next week," Stearns said.
In the meantime, two Florida counties in the path of the train route along the state's east coast - Indian River and Martin counties - are moving ahead with the first-known lawsuits to ever challenge a USDOT bond allocation.
Among several issues cited in the suits, the counties contend that the PAB allocation should not have been granted before completion of the NEPA review. Other issues such as safety, archaeological aspects, and real estate values have also been noted in the suits.
On June 10, the federal judge presiding in the cases denied requests from each county for preliminary injunctions that would have blocked the issuance of the PABs.
While the underlying suits are still pending, the judge's ruling denying the injunctions cleared the way for the bonds to be issued, according to John Whitlock, who is of counsel at Locke Lord LLP. He's not involved in the case.
Testimony during last month's hearing indicated that All Aboard Florida does not intend to wait any longer than necessary to issue the bonds.
Stearns told the judge that if the bond allocation is extended "that's not to suggest we intend for it to be six months [before issuing the bonds] because we need to close these as soon as humanly possible."
He went on to say that the judge's ruling would be "extremely important to how the market views the bonds."
Because All Aboard is a private company, it needed a conduit issuer to issue the private activity bonds. It selected the Florida Development Finance Corp., a statewide conduit agency .
Martin and Indian River counties, along with an anti-train organization called CARE, have sent FDFC documents citing several procedural problems at the agency, including the structure of the board that will consider the bond resolution.
One objection was the lack of a board appointee representing the banking sector, as required by FDFC's enabling legislation.
On June 19, Gov. Rick Scott appointed Fifth Third Bank vice president Ryan Tennyson to the FDFC board.
Tennyson, 67, of Orlando, will serve until May 2, 2016. He joins three other relatively new members appointed by Scott earlier this year.
The FDFC canceled meetings that were scheduled May 28 and June 10 to consider All Aboard's bond resolution.
All Aboard's application for conduit financing last year indicated that the company planned to privately place the $1.75 billion of bonds.
A draft preliminary official statement prepared for the now-canceled June 10 meeting indicates that All Aboard Florida plans to publicly offer $1.75 billion of flexible-rate bonds. The proceeds would be placed in an escrow account, invested, and remain unspent until a mandatory tender date. Merrill Lynch is the remarketing agent.
The draft POS also contains a description of the litigation filed with regard to the private activity bonds. A draft bond counsel opinion said the PAB claim is "without merit."
Bank of America Merrill Lynch will underwrite the transaction. Greenberg Traurig PA is bond counsel. Mayer Brown LLP is underwriters' counsel.