Brightline filed Chapter 11 last month and a lot of people treated it like a punchline. “See? Those yellow trains were always a dumb idea.” The Facebook crowd has been saying stuff like that for years.
But I am a business lawyer, and from where I sit, this looks like a very practical, savvy way to restructure debt they couldn’t pay.
Brightline Trains Florida LLC, the company that actually runs the trains and the stations, did not do anything. They are doing pretty well, keeping the trains running on an on-time schedule from Miami to Orlando. What went into bankruptcy were the Brightline parent companies, led by Brightline Holdings LLC, who had piled up billions in debt they could not repay after spending more than $6 billion to build the tracks, the crossings, and the stations. This Chapter 11 filing (a restructuring type of bankruptcy that does not involve liquidation) cuts a huge chunk of that parent debt. Furthermore, the main bonds ($2.2 billion in senior tax-exempt bonds that paid for construction, mostly insured by Assured Guaranty) stay in place. Even better for Brightline, these same creditors: Fortress, Assured Guaranty, Nuveen, First Eagle, Invesco, Nomura, and BlackRock agreed to put up ANOTHER $490 million so the railroad can keep going. When the dust settles, Brightline Holdings LLC will be out, and these lenders will be the new owners.
Investors like Blackrock, Nuveen, and Invesco (heard of QQQ?) know what they are doing. They are not taking ownership and committing half a billion more dollars into a venture unless they think it will be profitable if the debt is lighter.
Ridership and ticket sales are both up this year. The trains were never the problem, but the debt payments were. And now, with the parent companies lighter and Brightline Trains Florida LLC (the operating company) left alone, the railroad has a better chance of keeping growth instead of getting crushed by payments it could not make.
Bottom line: The yellow trains are not going away any time soon.
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