Tax-free bonds for Brightline, Florida’s high-speed train system, have earned preliminary investment-grade ratings.
S&P Global Ratings and Fitch Ratings both preliminarily assigned Brightline’s debt BBB- with a “stable” rating outlook. Kroll Bond Rating Agency gave the bonds a preliminary BBB rating.
The Florida Development Finance Corp. is issuing approximately $2 billion of the tax-exempt bonds. We expect that $1 billion of the bonds will be guaranteed by Assured Guaranty Municipal Corp.
The bonds will be used to refinance construction debt, pay financing costs, fund reserve accounts and reimburse previously incurred expansion expenses, according to S&P.
Brightline Trains Florida LLC is the only privately owned and operated intercity railroad in the country. The $6 billion, 235-mile, high-speed passenger rail system runs from Miami to Orlando.
The company had been contemplating refinancing its debt for months (“Brightline Looks to Refinance, Gain Public Rating”).
Bondholders cheer
The rail system began service from Miami to West Palm Beach in 2018. It has six stations, a seventh is expected to open by the end of 2026 and the company is considering an extension to Tampa.
Last September, Brightline added operations to tourist-rich Orlando International Airport, an important move for the company.
Bondholders are among those cheering its growth. Many investors have acquired Brightline’s private activity bonds through us, so we share in their satisfaction. The bonds yielded more than 7.50% tax-free.
We should note the bonds were non rated and considered speculative, and were suitable for higher-risk investors. The bonds were issued in $100,000 denominations.
Today, the issuer announced a conditional call for May 15, 2024, at a price of 107.00.
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Holders of Community Development District bonds are also following Brightline closely.
The rail line’s growth is leading to increased real estate values near its path, which in turn enhances the value of CDD bonds.
As the largest underwriter of CDD bonds in Florida, we, too, are keenly interested in Brightline’s progress.
Growing the most profitable route
Brightline said it plans to add 20 train coaches to accommodate demand for the longer and more profitable service from Miami to Orlando, according to the Orlando Business Journal. The cars should be in service later this year and early next year.
Ultimately, the long-distance leg is expected to account for 87% of the system’s revenue.
Brightline reported total revenue of $15.5 million in February, compared with $4.7 million in February 2023.
Last year the rail line carried 2.1 million passengers and estimates ridership will nearly double this year.
