MIAMI — The finances of Brightline’s Florida operation have produced cautionary action by bond-rating agencies on Wall Street, which have downgraded the company’s bonds and notes over concerns about its ability to service its debt.
The South Florida Sun Sentinel reports in a paywalled article that Fitch Group and Kroll Bond Rating Agency downgraded more than $4 billion in bonds this month, after another agency, S&P Gloval, did the same in March for more than $1.1 billion in notes. In each case, the agency’s notes included “negative outlook” or “negative watch” notations, concerned about the rail operator’s ability to generate cash to service its debt.
KBRA noted that “capacity constraints” had led to lower than expected short-distance ridership, while Fitch said its downgrade reflected a “weaker than expected ridership ramp up, lower faires, elevated operating costs, and significant spend down of the project’s liquidity accounts.”
The newspaper also notes that Brightline’s April report included an announcement of plans for a company affiliate to raise equity financing in 2025 “subject to market conditions, with proceeds expected to be used to repay existing debt.” More information could come Thursday on an earnings call for investors.
The financial developments come as Brightline continues to report monthly gains in revenue and ridership, after losing nearly $550 million in 2024. April ridership 243,285, up 9% over the same month a year ago. With long-haul trips increasing by 20% while short-haul trips in Florida declined by 3%, overall revenue in April was up by 15% over the same month in 2024, to $16.8 million.
The company has been addressing capacity issues by adding cars to its trains and is acquiring new coaches to further lengthen its consists [see “Six rail routes receive federal grants …,” Trains News Wire, Jan. 10, 2025]. It has also made moves such as launching a rider rewards program [see “Brightline introduces …,” News Wire, April 4, 2025] and a revised commuter pass program to replace one discontinued in 2024 [see “Brightline to bring back …,” News Wire, Jan. 13, 2025]. Other recent efforts include partnerships with airlines and cruise ships, and sales incentives for travel agencies, such as a 20% commission for long-haul bookings through October.
Brightline happened because of a chance alignment of many factors. The largest was zero/near-zero interest loans; no one buys bonds with their own money. With the cheap money gone rotating the financing will get tricky.
Hmmm, looks like the fatasses are getting twitchy.