Brightline West wins $2.5 billion PABs allocation as it heads to market

Close on the heels of a $3 billion federal grant, the U.S. Department of Transportation Tuesday allocated $2.5 billion in private activity bonds authority for the Brightline West High-Speed Intercity rail project between Las Vegas and southern California.

The DOT in 2020 allocated $1 billion in private activity bonds to Brightline, which issued the debt late that year with Morgan Stanley as the underwriter.

Brightline is set to remarket $675 million of the 2020 debt on Jan. 31, with Morgan Stanley acting as remarketing agent. The California Infrastructure and Economic Development Bank is conduit for $635 million and the Director of the State of Nevada Department Business and Industry is conduit for $40 million, according to bond documents. Orrick, Herrington & Sutcliffe LLP is bond counsel.

Brightline West

Brightline already operates a line in Florida, which represents the nation's first privately-owned fast passenger rail. The $6 billion project was financed in part with $3.75 billion of debt, the majority of which is owned by Nuveen in its high-yield fund.

"The Brightlines have always been something for high-yield [mutual] funds," said Dora Lee, director of research for Belle Haven Investments, which owns both Brightline credits. "Given the deal sizes and the dearth of very large high-yield names, that has lent them some popularity in the high-yield market," Lee said. Now that Puerto Rico has mostly finished its restructuring and amid a lack of new tobacco bonds, Brightline is "one of the biggest issuers where you get some level of liquidity in the high yield market," she said.

The project plans to issue green bonds in the future, some of which will be used to refund the 2020 PABs, according to bond documents.

In addition to the $3 billion infrastructure grant in December, the project won $25 million last June to support construction of a pair of stations in Hesperia and Victor Valley, California.

The 218-mile line will mainly run along the I-15 median with fully electric trains capable of reaching 186 mph or more, according to officials.

"Today, the Biden-Harris administration takes the next step to fulfill the promise of high-speed rail in the American West, with $2.5 billion in private activity bond authority to  lay tracks, create jobs, and connect American cities," said U.S. Transportation Secretary Pete Buttigieg Tuesday in a release announcing the authorization.

Workers last week began field investigation work in Nevada within the proposed rail corridor, which will "advance final stages of design in preparation for a groundbreaking," the company said.

"Connecting Las Vegas and Southern California will provide wide-spread public benefits to both states, creating thousands of jobs and jumpstarting a new level of economic competitiveness for the region," said Brightline founder and chairman Wes Edens in a statement. "We appreciate the confidence placed in us by DOT and are ready to get to work."