All Aboard seeks another bond-sale extension

Posted on December 10, 2015

All Aboard Florida wants more time to sell $1.75 billion in tax-exempt bonds it plans to use to help pay for its proposed passenger train service connecting South Florida to Orlando.

The Coral Gables-based company has asked the U.S. Department of Transportation to extend a Jan. 1 deadline that federal officials set for the bond issue. The request marks the second time All Aboard Florida has asked for an extension.

All Aboard Florida had planned to sell the bonds this year, but the tight municipal bond market forced the company to shelve the sale.

Federal transportation officials are evaluating the company’s request for an extension.

All Aboard Florida, which announced in November that its train service will be called Brightline, said the company remains committed to the project.

“Our request to USDOT provides us the flexibility to structure financing in a way that serves the best long-term interest of our business,” Mike Reininger, president of All Aboard Florida’s Brightline said in a statement released by the company. “We remain committed to delivering service from Miami to Orlando and have made significant advancement with our construction to begin Brightline operations in 2017.”

Opponents of the rail project took aim at All Aboard Florida’s request, saying it is a sign of uncertainty

“The fact that AAF was unable to sell its bonds has prompted them to ask for a second extension from the USDOT. This is a reflection of the project’s weakness” said Brent Hanlon, the treasurer of CitizensAgainstRailExpansion, also known as CARE FL, an opposition group that has been fighting the rail project.

However, All Aboard isn’t alone in postponing bond issues. Other high-yield borrowers have also been forced to postpone sales. Plus, concern about capital markets has been steady since the summer.

“High yield bonds, leveraged finance, leveraged buyout loans, they all had a bad second quarter and a bad third quarter,” Chris Kotowski, an analyst at Oppenheimer & Co. in New York, told The Palm Beach Post in October. “The market has been dreadful.”

AllAboardFlorida won preliminary approval from the Department of Transportation in December 2014 to issue the private activity bonds. The company was initially given until July 1 to complete the sale.

In May, All Aboard announced it was seeking an extension of the July 1 deadline and the company was ultimately given until Jan. 1 to finalize the sale.

The Florida Development Finance Corp., a special financing unit authorized by the state Legislature to issue tax-exempt bonds to private entities, approved the sale in August.

Under the plan, the FDFC will act as conduit issuer of the bonds, which will be sold by All Aboard Florida to private investors.

According to documents filed with the FDFC, the 30-year bonds will not be rated and will be sold only to accredited investors and qualified institutional buyers. The minimum denomination will be $100,000. Neither taxpayers nor state and local governments are on the hook for the money if the project should fail.

There has been $15 billion set aside at the federal level for tax-exempt, private activity bonds that help pay for transportation projects. The program is designed to increase private sector investment in U.S. transportation infrastructure, federal officials say.

As of Nov. 19, $5.9 billion in bonds had been issued for 15 projects. Another $5.6 billion has been allocated for six projects, including All Aboard Florida.

The Coral Gables-based company’s $1.75 billion allocation is the largest on the federal list. Next in line: $1.3 billion for The Purple Line, a 16-mile light-rail project planned in Maryland.

Although the bond sale has been put on hold, All Aboard Florida has continued to move forward with construction of the first phase of its project between Miami and West Palm Beach. The bonds would be used to fund the project’s second phase from West Palm Beach to Orlando.

In Palm Beach County, All Aboard has crews working at several crossings along the Florida East Coast Railway corridor. Construction at the site of the company’s station in downtown West Palm Beach has also continued.

The company plans to run 32 trains a day along the FEC tracks with stops in Miami, Fort Lauderdale, West Palm Beach and Orlando. All Aboard Florida plans to launch service between Miami and West Palm Beach in 2017. The West Palm Beach-to-Orlando span is expected to begin by the end of 2017.