Brightline saw more passengers in June as it continues to expect to take on outside co-owners.
Brightline has been looking to raise money for months by selling equity in the train service to outside investors. The company updated bondholders in its monthly business report. Brightline said it "continues to actively progress the planned issuance of a substantial amount of equity, with a global process underway engaging with numerous potential strategic partners."
Some of those bondholders did not receive their interest payments as scheduled. Brightline skipped paying interest earlier this month to lenders holding unsecured IOUs.
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Missing those regular payments could cost the company more. While it does not mean Brightline is in default of its bond agreements, postponing three interest payments may lead to the company paying higher interest rates on the bonds.
How much of the company it is looking to sell, at what price and to whom isn’t known. Brightline cautions that any stock sale is subject to a number of conditions, including market conditions, timing and specific terms.
“We're targeting a significant amount of equity coming to the company,” said Ken Nicholson, a managing director at Brightline’s owner, Fortress Investment Group, in the company's May conference call with investors.
Money raised by any equity sale would be used to repay higher interest rate bonds and to build its cash reserves.
Brightline also disclosed it is asking to issue another $400 million dollars in IOUs through the Florida Development Finance Corporation. Issuing so-called private activity bonds through that agency allows the interest to be paid to investors tax-free. At least some of this money would be earmarked for expanding the railroad between Orlando and Tampa.
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The company’s credit rating was cut to speculative — or junk — status in May by Fitch Ratings. Two other corporate credit rating agencies also slashed their assessment of over $2 billion of borrowing by Brightline.
The agencies cited Brightline’s spending, the lack of higher train fares and ridership that isn’t growing as fast as expected.
Ridership between South Florida and Orlando was up 17% in June. Short haul rides — those that begin and end in South Florida — were up 7% compared to a year ago.
Despite carrying more short distance passengers last month, that South Florida ridership is down 3% through the first six months of the year. Ticket revenue from those passengers is down 11% year-to-date. It continues to rely on long distance fares and passenger spending on-board trains to boost its business. Total revenue this year is up 12% through June.
The service launched a loyalty program in April and offered bonus points for passengers. That promotion ended in early June, “so the fare impact has moderated since April and May,” the company noted.
Brightline was operating fewer trains, but longer trains. In June it ran six-car trains. It expects to put a seventh car on trains before the end of this year.
