Nearly all Brightline West bondholders participate in last-minute debt exchange

Brightline West saw nearly all of its bondholders tender their bonds last week during a rushed holiday week debt exchange ahead of a Dec. 1 deadline.

More than 95% of holders of $2 billion of California Infrastructure and Economic Development Bank senior subordinated secured revenue bonds tendered their paper in a private exchange for a mix of cash, one-year bonds with 12% yields, and equity warrants. More than 99% of holders of $500 million of senior revenue bonds issued by the Director of the State of Nevada Department of Business and Industry participated in the same exchange, the company said in a Nov. 26 EMMA filing.

Brightline West sold the $2.5 billion of private activity bonds in February. The terms gave the owner until the end of November to secure additional funds or face a mandatory bond redemption at 101 plus interest. The company said on Nov. 20 that it had reached a deal with the majority of its bondholders for the tender deal, which allows the company to avoid the mandatory redemption or tipping into default.

Last week’s private exchange will be followed by a public exchange for those holders who still want to tender their debt. The private swap was rushed through during the Thanksgiving week to avoid a Dec. 1 technical default, said a bondholder.

Those who opt to hold on to their original bonds will now be subordinated to the new bondholders.

The restructuring is designed to give the Fortress Investment Group-backed company more time to put together a financing package for the 218-mile line that could be the country’s first electric high-speed train.

“With this tender, it definitely gives the credit much-needed runway to come up with the [financing] plan, and hopefully with this additional time, management will be able to address some of the bigger-picture questions and put the credit on a more sustainable path,” said Dora Lee, director of research at Belle Haven Investments, which participated in the tender.

Key to the new financing package is a $6 billion Railroad Rehabilitation and Improvement Financing program loan that Brightline hopes to see approved by early 2026.

Approval of the loan by the U.S. Department of Transportation would be a positive sign, Lee said.

“Given that both [Brightline Florida] East and West each need large amounts of cash, and there’s only a limited number of deep pockets, not having that government loan available would make the competition even stiffer between the two projects.”

The new bonds come due in November 2026 and feature a pledge that they will be paid down first with any cash or grants that the company secures in the course of the year, said the first bondholder, who participated in the tender.

“We are expecting to be taken out before November 2026,” the holder said. “This is really just a bridge loan, an initial financing, and you’re just relying on them getting additional financing,” they said. “You don’t necessarily have the same risk as you had before. You don’t need the train up and running, all you really need is that they progress to the next phase.”

The Las Vegas to southern California system’s price tag is now pegged at $21.05 billion, up from $16.1 billion. In addition to the $6 billion RRIF loan, the company is aiming to raise $4 billion of bank debt, $4 billion of “other debt,” $4 billion of equity and $3 billion of grant funding.

The company came to market last week with $700 million of revenue bonds issued through its usual California and Nevada conduit issuers in a financing that was largely a placeholder to maintain private activity bond allocation granted earlier this year by the states.