December 1, 2023


Business&Finance Specialists

Fortress to Finalize Financing Plans for $8 Billion Vegas Rail Line

3 min read

(Bloomberg) — Brightline Holdings, Fortress Investment Group’s rail company, will finalize the financing plans for its $8 billion project laying train tracks to Las Vegas from southern California within the next six months, Chief Executive Officer Michael Reininger said during a press briefing Tuesday.

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Reininger said the company would benefit from the pending federal infrastructure bill, and is heading off some of the concerns that forced it to postpone a massive bond offering last year for the speculative venture. He was speaking about the delayed project, called Brightline West, at an event in Sacramento at the Siemens Mobility facility showcasing the latest trains for the company’s Florida line.

“We are working to set up Brightline West up for optimal success,” he said. “We are focused on eliminating the impediments that will bring certainty to the project, particularly from the finance perspective.”

The efforts include extensive planning for another California station in Rancho Cucamonga. The unrated bond offering that was supposed to sell last year would have financed a 169-mile (272-kilometer) line connecting Las Vegas to the desert town of Apple Valley, 90 miles away from downtown Los Angeles. A stop at Rancho Cucamonga, which is located along an existing commuter rail called Metrolink, would position passengers on the electric, high-speed line closer to the nation’s second-most populous city.

Fortress last year pulled the bond sale when it failed to attract enough investors even after it was downsized to $2.4 billion from $3.2 billion, showing that sweeteners and high yields weren’t enough to overcome reservations about a project that depends on the post-pandemic recovery of the travel and entertainment industries and has few comparisons in the U.S.

Likely Request

Reininger said the company will convert $1 billion of short-term financing for the Las Vegas project, issued to preserve its federal allocation of private activity bonds, into fixed-rate debt. Such debt, which are meant for ventures for the public interest, is limited. States also receive a capped amount of the debt from the federal government that they can bestow on projects. Last year, California and Nevada had extended a large portion of their allotments to the Las Vegas rail project, which was ultimately returned to the states when the company failed to sell the debt.

The firm is likely to request private activity bonds again, Reininger said, adding that “we probably will seek to get a little bit more to fill out the debt side of the equation as we move to the capital markets.”

It would take four years from construction to the first ride to Las Vegas, he said.

Reininger didn’t say how much the company hopes to gain if the federal infrastructure bill passes, but said it was important to its plans.

“It makes the rest of the equation easier to put together,” he said in an interview.

California Treasurer Fiona Ma said during the media event that she and representatives of the governor and controller, who decide which ventures receive the state’s private activity bonds “have all been uniformly aligned to make sure this project happens.”

“We can address climate change while creating good-paying manufacturing jobs and union construction jobs,” she said.

Meanwhile, Brightline plans to resume operations in November for its luxury train line in Florida, the country’s first new privately financed intercity passenger rail in a century. It launched the service in 2018 and then suspended the trains running between Miami and West Palm Beach in March 2020 because of the coronavirus pandemic.

A 170-mile expansion to Orlando International Airport is expected to be completed by late 2022, and new stations in Aventura and Boca Raton would be open by then. Investors have rewarded the developments: a bond due in 2049 traded Monday at an average yield of 6.2%, down from 7.56% in January, according to data compiled by Bloomberg.

(Updates with Florida expansion in last paragraph)

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