Brightline readies bond market test

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Brightline's BrightBlue trainset that arrived in Florida in 2016.
Bob Johnston
NEW YORK — Bond analysis firm Fitch Ratings has assigned a BB-(EXP) rating to about $600 million of surface transportation facility tax-exempt revenue bonds that the Florida Development Finance Corporation soon plans to issue on behalf of All Aboard Florida — Operations LLC doing business as Brightline, LLC.

The bonds would help provide additional financing for the Miami-West Palm Beach, Fla. segment of the planned Miami-Orlando, Fla., venture.

Although the rating indicates that the bonds are of a speculative grade, characterized as, “in the lower middle of the pack,” an observer familiar with corporate bond offerings tells Trains News Wire, the “EXP” designation indicates the rating is based on a solid “expectation of performance.”

The press release Fitch issued on Nov. 27 says, “The BB- rating is supported by a strong breakeven analysis, which shows under sponsor case assumptions that Brightline achieves breakeven levels if stabilized ridership is 44 percent lower than projected.”

Brightline has pegged passenger counts at 3.5 million with revenues of $147.6 million by 2021, but Fitch determined it could break even with 1.6 million passengers and $90.6 million in revenue.

Backing up its reasoning, Fitch acknowledges that forecasting demand is uncertain because there is no peer group of operations with which it can be compared, but cites strong passenger rail demand and pricing power in similarly capacity-constrained Amtrak corridors such as California’s Pacific Surfliner and the Northeast Corridor.

The Florida Development Finance Corp. set the stage by approving its involvement as Brightline’s tax-exempt bond issuer in late October.

Previously, Brightline attempted to get investors to buy bonds that would help finance the West Palm Beach to Orlando, Fla., segment, but those bonds were never rated and there were no takers, so the company continues to self-finance the planning and permitting process for that extension.

Fitch’s analysis confirms previous reports that preliminary service between West Palm Beach and Ft. Lauderdale is set to begin in December, with trains continuing to Miami as soon as the Miami Central station is completed sometime in first quarter 2018.

However, Brightline has yet to announce a specific start date or ticket pricing and declined comment to Trains News Wire in response to the Fitch bond rating announcement.

The analysis is available online.
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