Brightline Florida enters Chapter 11 as bond insurer backs $490m rescue

Certain Brightline Florida holding entities have filed for Chapter 11 bankruptcy protection, bond insurer Assured Guaranty confirmed on Friday, as part of a restructuring that will cut the railroad’s debt mountain nearly in half while keeping its trains running.

Assured Guaranty Inc, a subsidiary of NYSE-listed Assured Guaranty Ltd, said the operating company, Brightline Trains Florida LLC, has not filed for Chapter 11. The Miami-to-Orlando service will continue without interruption while the holding company restructures through the courts.

Under a restructuring support agreement signed by financial stakeholders including Assured Guaranty, the operating company will receive $490m of new capital after the entities exit bankruptcy: $350m of new junior debt and $140m of additional senior debt, ranking equally with its existing senior debt. Assured Guaranty has committed to provide $70m of that senior debt.

The stakeholders have also agreed $258m of post-petition funding during the bankruptcy process, of which Assured Guaranty will provide up to $178m. Bondholders have accepted a limited deferral of scheduled interest payments, and the insurer, which covers slightly more than half of the operator’s existing senior tax-exempt bonds, said it holds the majority debt voting position.

The restructuring remains subject to bankruptcy court approval. The Wall Street Journal, citing people familiar with the matter, reported the company is restructuring about $5.5bn in debt and plans to cut it to roughly $2.7bn, with $2.2bn in senior secured debt remaining outstanding. Bondholders including BlackRock, First Eagle, Invesco, Nomura and Nuveen agreed to provide the $490m exit financing.

The Fortress Investment Group-backed company is the largest private intercity rail operator in the United States, but ridership failed to grow fast enough to sustain its heavy debt burden despite a profitable passenger business.