In a recent high-profile transaction involving Florida’s Brightline passenger train, Assured Guaranty played a crucial role by wrapping $1.13 billion, or 51%, of the $2.219 billion of senior bonds issued by the passenger rail line. This significant investment gives Assured Guaranty control in the event that the issuer faces debt payment trouble. With an irrevocable policy in place, Assured Guaranty holds a controlling vote for remedies if bondholders need to direct the bond trustee, Deutsche Bank National Trust Company, to take action. Lorne Potash, managing director and head of infrastructure finance and project finance, Americas at Assured, highlighted the importance of this control, stating that it allows Assured Guaranty to make decisions on behalf of senior bondholders in unexpected situations.
Moreover, Assured Guaranty’s insurance also provides additional comfort to investors. Knowing that a reputable and sophisticated party with a significant economic interest in the success of the project has approved the bonds adds a layer of security for investors. This reassurance is particularly crucial in a complex and sizable project like the Brightline passenger train, which operates a $6 billion, 235-mile train system from Miami to Orlando. The project, backed by Fortress Investment Group, marks the first private passenger intercity express system built in a century and has garnered significant attention in the investment community.
The recent deal involving Assured Guaranty and Brightline restructured nearly all of the project’s capital stack, marking a significant milestone in the credit’s journey. The $2.2 billion senior bonds issued as part of the transaction represented Brightline’s first foray into the investment-grade market. These senior bonds carried low investment-grade ratings of BBB-minus from S&P Global Ratings and Fitch Ratings, and BBB from Kroll Bond Ratings Agency. However, with Assured Guaranty’s insurance, the senior bonds received higher ratings of AA from S&P and AA-plus from Kroll, reflecting the added security provided by the insurer.
Following the issuance of Brightline’s bonds, the market response has been positive. The tax-exempt unrated bonds, which carried a 12% yield, experienced an increase in trading value, indicating growing investor confidence in the project. Additionally, the insured senior bonds showed a strong performance in secondary trading, with prices exceeding their original levels. The investment-grade bonds due in 2053, featuring insurance, also saw an uptick in trading value, indicating investor demand and confidence in the credit’s stability. Overall, the market response to the Brightline passenger train bonds with Assured Guaranty’s insurance has been favorable, reflecting the importance of financial security and control in large infrastructure projects.
Assured Guaranty’s role in the Brightline passenger train bonds deal highlights the importance of financial security and control in complex infrastructure projects. Through its insurance and control rights, Assured Guaranty provides reassurance to investors and plays a critical role in managing potential risks in the project. As the Brightline project continues to expand and grow, the partnership between Assured Guaranty and the passenger rail line sets a precedent for future infrastructure financing deals, emphasizing the value of secure and reliable financial protection in the infrastructure sector.