Brightline Florida hit with five-notch S&P downgrade

Brightline Florida

S&P World Scores Friday delivered a five-notch blow to $2.2 billion of Brightline Practice Florida LLC’s senior bonds and warned that it expects a default by January 2027.

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The downgrade pushes down Brightline’s so-called senior OpCo bonds to CCC from BB-minus. The score applies to each unenhanced bonds and the underlying scores of bonds assured by Assured Warranty, which wraps roughly $1.3 billion of the debt.

The score company additionally downgraded $1.19 billion of Brightline East’s bonds one notch, to CCC from CCC-plus, and predicted default on these bonds as effectively by January 2027.

The outlooks for all of the debt stay unfavourable, which displays “the publicity of the mission to decrease development in 2026, which may carry ahead the chance of default if the ridership or fare trajectory underperforms our forecast,” S&P mentioned.

A CCC score contains an estimate of default in a couple of 12 months.

The actions have an effect on $3.338 billion of debt issued by Florida’s privately owned intercity categorical practice, which has skilled a rollercoaster trip within the municipal bond market.

Its struggles during the last 12 months have sparked downgrades — together with from S&P in August — and deep drops in bond costs which have dragged down the efficiency of some high-yield municipal bond funds. In November, Assured, which carries S&P’s AA insurer monetary energy score, dropped its personal inner score to below-investment grade whereas saying it stays bullish on the way forward for the credit score.

In 2024, the corporate, which is owned by Fortress Funding Group, overhauled its advanced capital stack in a borrowing that restructured $5 billion of debt throughout three liens, with a mixture of taxable and tax-exempt debt that includes subordinate and senior liens and the Assured wrap.

The deal lifted a lot of the corporate’s speculative-rated bonds into the investment-grade class for the primary time — a transfer that some buyers mentioned got here too quickly. Fitch Scores by Could had dropped the credit score again into junk territory.

S&P doesn’t charge the $1.2 billion of unrated AAF Operations Holdings LLC bonds or $985 million of so-called commuter bonds.

S&P “sharply revised” its base-case situation primarily based on the practice’s efficiency in the course of the second half of 2025, analysts mentioned. “We consider the most probably path to default for each OpCo and the [Brightline East bonds] is that after reserves are depleted, they may default when every is unable to totally pay its debt service obligation on Jan. 1, 2027.”

The score company mentioned it assumes the debt will probably be restructured and that OpCo will proceed to function as a going concern fairly than liquidating property.

S&P dialed approach again its future ticket revenues projections, to fifteen% in 2026, adopted by 12.5% in 2027, 10% in 2028, 5% in 2029, and Shopper Worth Index thereafter. That compares to prior forecasts of 38%, 17%, 11%, and 9.4% via 2029.

Brightline on Tuesday introduced it plans to faucet reserves to make a Jan. 1 debt funds on senior bonds. It isn’t clear whether or not it has adequate liquidity to cowl the funds.

The corporate has not supplied particulars a couple of coming Jan. 15 cost on the subordinate bonds. It has the choice to defer curiosity funds a complete of thrice on the subordinate bonds. When Brightline pulled that lever in July, it triggered worth declines throughout bond tranches.

The OpCo bonds, which traded at par in January, noticed an odd-lot commerce Friday at 66 and a $15 million commerce at 72 on Dec. 15, earlier than the S&P downgrade.

Neither Brightline nor Assured responded instantly to requests for remark.