Brightline Trains Florida rating cut to B from BB-plus by Fitch

Brightline Trains Florida LLC’s $2.2 billion in senior secured private-activity bonds were downgraded to B from BB-plus and placed on rating watch negative by Fitch Ratings Thursday, citing BTF’s continuing operating cashflow losses.

The downgrade of the debt of Brightline, also known as OpCo, “is driven by the continuation of operating cashflow losses that result in faster-than-expected rapid depletion of liquidity accounts, leaving very limited protection before all funds are exhausted,” Fitch Ratings said.

Fitch said ridership and revenue ramp-up continue to lag projections, “despite the addition of new train cars to alleviate reported capacity constraints. There remains a high degree of uncertainty that increases to capacity will be met with demand that can drive both higher ridership and fare revenues.”

While “management is pursuing several action plans to enhance reserves available for operations and debt repayment protection through additional debt borrowings or third-party equity funding,” Fitch cannot assess their effects until they are effectuated. Regardless, Fitch is concerned by Brightline’s continuing operating losses and that this may lead to the company’s complete loss of liquidity.

Fitch also maintains a CCC-plus rating on Brightline East (BLE) LLC’s $1.12 billion senior secured taxable notes and keeps them on ratings watch negative.

BLE has a lower rating than BTF because of the former’s subordinated cash flow rights, narrower coverage margins, and higher refinancing risk, the agency said. The latter’s rating “reflects the increased likelihood of cash being trapped at the OpCo level, which limits available funds for distributions to service Brightline East debt,” Fitch said.

S&P Global Ratings rates the BTF debt BB-plus with a negative outlook and the BLE debt CCC-plus with a negative outlook.

KBRA rates the OpCo bonds B-plus with a negative outlook and the BLE notes BB.

Investors are eyeing an Aug. 13 mandatory rollover of nearly $1 billion bonds for planned commuter rail projects in partnership with Miami-Dade and Broward counties.

Brightline’s plan to issue $400 million of private-activity bonds advanced in mid-July after the Florida Development Finance Corp. held a Tax Equity and Fiscal Responsibility Act public hearing on the financing.

Brightline missed an optional interest payment in mid-July.

Brightline Florida owns and operates a 235-mile intercity high-speed passenger rail service connecting Miami to Orlando, with plans for extension to Tampa.

A spokesman for Brightline didn’t immediately respond to a request for a comment.