(Bloomberg) — Florida’s high-speed rail system, Brightline, is tapping the US high-yield market with a $1.25 billion offering on Monday.
The Fortress Investment Group-backed railroad is selling six-year senior secured notes callable after three years, according to people with knowledge of the matter. The bonds — which are expected to price next week — are part of the rail line’s plans to refinance its roughly $4 billion debt load.
Morgan Stanley, the sole underwriter, had been sounding out investor appetite on the taxable junk-bond at a yield of 10% to 11%, Bloomberg reported earlier this month. Interest has reached about $500 million for the deal at that yield range.
The offering is part of an expected debt-refinancing package that includes $2 billion of proposed senior municipal bonds that may be issued this month by the Florida Development Finance Corp. Another $1.4 billion of debt and equity could come from Fortress or other investors.
In addition to paying off Brightline’s unrated senior tax-exempt bonds and taxable debt, proceeds will fund almost $550 million in reserves to cushion against potential ridership and revenue declines.
The restructuring comes as Brightline faces a July 1 interest payment on its outstanding municipal debt.
Earlier in April, the tax-exempt notes were assigned a S&P Global Ratings preliminary rating of BBB-, its lowest investment grade. The muni bonds also received preliminary designations of BBB- from Fitch Ratings and BBB from Kroll Bond Rating Agency.
Brightline is betting on replicating the model of Amtrak’s high-speed Acela service in the Northeast with better amenities. The railroad says travelers between Miami and Orlando — both big tourism destinations and business centers — can avoid the stress of a traffic-clogged four- to five-hour drive as well as the hassles of air travel.
Brightline, which carried about 260,000 passengers in March, began its short distance service between Miami and West Palm Beach in 2018 and opened service to Orlando in September 2023 after being delayed.
The rail service makes the long-distance trip in roughly 3 hours and 30 minutes, on trains that can reach speeds up to 125 miles per hour. Cars can make the trip in about the same amount of time — without traffic. Highway congestion could extend the trip to as much as five hours.
Brightline carried 2.1 million passengers in 2023 and currently forecasts 4 million riders in 2024, rising to 8 million in 2026.
–With assistance from Gowri Gurumurthy and Martin Z. Braun.
(Updates with added details starting in fourth paragraph. A previous version of the story incorrectly sized the debt refinancing package at $3.2 billion.)
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