Brightline lands $350 million Assured loan in case of bankruptcy
Scott McIntyre/Bloomberg
Brightline has reached a deal with municipal-bond insurer Assured Guaranty Ltd. that would provide the debt-laden Florida railroad with at least $350 million in new loans if it heads into Chapter 11 bankruptcy, according to people familiar with the matter.
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The move underscores a growing sense of urgency from Fortress Investment Group-backed Brightline to address its $5.5 billion of obligations. Its deeply distressed bonds have languished for months as municipal-debt firms and hedge funds that hold the railway’s corporate debt have jockeyed for the best position in a major restructuring that has long been seen as inevitable.
The deal with Assured, known as a restructuring support agreement, is typically a precursor to a Chapter 11 bankruptcy. The railroad could file for court protection within the next few weeks, said the people, who asked not to be named discussing private information.
Still, the agreement is not yet in effect and Brightline could strike what it deems a better arrangement with other creditors, either in or out of court, the people added.
A spokesperson for Brightline said the company continues to have “confidential discussions with our stakeholders on a variety of options that will improve our balance sheet and position the company for long-term success.” A representative for Assured Guaranty didn’t respond to requests for comment.
Brightline has been holding private talks since at least April with certain holders of its debt about how it could restructure its liabilities. Assured taking the lead in such an effort has long been an option — on a May 8 earnings call, CEO Dominic Frederico said, “I don’t mind owning a railroad” if it came to that.
Conceived as an alternative to long Florida drives, the railroad has been falling short of projections since it launched between Miami and West Palm Beach in 2018. It’s been working to raise equity and find strategic investors or a buyer since last year.
Municipal bondholders including Invesco, Nuveen LLC and First Eagle Investments, which star muni manager John Miller joined after his exit from Nuveen, have for months found themselves pitted against the hedge fund group, led by distressed-debt specialists Redwood Capital, Aristeia Capital and Nut Tree Capital Management, in a battle to fund any bankruptcy.
First Eagle declined to comment, and representatives of the other firms didn’t respond to requests for comment.
A restructuring would rank among the biggest in the history of the municipal-bond market, alongside those of Puerto Rico and Detroit.
The opportunity to provide bankruptcy financing, which typically ranks senior to all existing debt, gives existing creditors a measure of control over the court restructuring process and a clearer path to recovering the value of their outstanding debt. In Brightline’s case, much of that debt now trades for pennies on the dollar.
Invesco and Nuveen, giants in the world of tax-exempt securities, hold Brightline’s $2.2 billion of highest-priority debt alongside First Eagle. Assured Guaranty backs about $1.1 billion of those senior securities and must consent to any changes.
The hedge fund group, which has been advised by lawyers from Davis Polk, holds a majority of Brightline’s $1.1 billion of corporate notes, which rank junior to the municipal debt.
The remaining roughly $2 billion in obligations consists of junior-ranking municipal bonds.
