High-speed Rail: Laying the Groundwork for Growth (CPE)

Transcription:

Caitlin Devitt (00:09):

Good Morning, high speed rail. We are here to talk about, let everybody kind of come in. Okay. So first I have a question. How many people here have ridden the Bright Line?



(00:38):

Okay. Oh, everybody up here? I thought there'd be more people out there considering where we are, but I bet if I ask that question next year there's going to be more hands that come up. So it's an exciting moment for High-Speed Rail. We have the Bright Line Florida financing deal, which we're going to talk a lot about today. And then we also have the Florida, I mean the Bright Line West groundbreaking that happened last week. And President Biden within a recent visit from the Japanese Prime Minister reaffirmed his support sort of implicitly for Texas Central. Those are two other projects we're going to talk about. We might talk a little bit about California. I'm not sure where we're at with that, but we'll kind of give a little overview of that. And so there's all these different projects going on and the administration, like I said, has really made high-speed rail a priority or at least talking about it. The Secretary Buttigieg position is if you build it, the skeptical Americans will ride it and it will work. So here's a great panelists, I'm excited. I will let you guys introduce yourself.



Maria de Urquijo (01:52):

Hi Maria de Urquijo. I'm a Senior Director with KBRA on the Project Finance and Infrastructure team, and I was part of the team that created Brightline. So happy to be here. Thank you.



Nicholas Donias (02:05):

Great. Thank you for rating them. Investment grade. Awesome. My name is Nick Donias. I'm a Director at Sumitomo. We're a lender to Brightline Florida and also a co-manage on the different financings that they just did in the market.



Sam Nakhle (02:23):

And I'm Sam Nakhle. I'm with Assured Guaranty in the Project Finance Group along with my colleague Lauren Potash, who has the group who's wearing a matching jacket to Bill Bock's jacket, so you can spot him easily. So you obviously all know a Assured Guaranty. Most of what we do is guaranty municipal debt, AA rated AA by S&P, AA plus Kroll, A one Moody's 250 billion of par outstanding, guaranteed about 11 billion of claims paying resources. But so Lauren and I, just to give you a little bit of background, we sit in the project finance group, which is kind of a subset of the Muni group, but we also cover Project Financings, public private partnerships for p threes as well as, I mean, Brightline is not technically a P three, it's really just a pure project financing, no granting authority, but so we cover the US, Canada, Latin America.



(03:19):

We've actually guaranteed some toll roads in LA Am although we've taken a step back recently and in Europe we have a separate team that covers Project Financings in Europe out of London and now Paris because of Brexit. And we also have people in Madrid and Milan and most recently in Australia. So just to give you a quick, again, quick background, I don't want to belabor the intro, but so we are pretty active in the transportation sector on the airport side. Last year, at the end of the year, we guaranteed 800 million for JFK new terminal one, so that was part of their 2 billion issuance to take out the bank debt, about three and a half billion of bank debt left.



(04:04):

We also have a lot of exposure to LaGuardia terminal B, so that was a 2016 projects built and operating. Obviously for those of you that have been through it, it's a major upgrade from what it was. And we also have exposure to the LAX people mover. On the toll road side, we have, again, globally about 5 billion to P threes. Within the US it's closer to 800 million. Most recently we did Triangle Expressway, so that was a $340 million deal, not quite a P three, but it fell into our group. And also two years prior, Penn Major Bridges, we guaranteed 570 million there. We're also active in social infra, so that's student housing and military housing and believe it or not, stadiums for student housing, typically we guarantee on campus privatized student housing. Most recently we did a William and Mary deal back in 23, 200 17 million, but we have about a billion of exposure to that space.



(05:08):

Stadiums, we've done a number, but kind of the highlights are city, field and Yankee Stadium we did in 2020 and 2021. City field, we have about 550 million Yankee Stadium, about 730. We're also active in the, we're looking to get into the energy space and kind of look at the port sector. We haven't really seen any p threes that we like. And just to kind of conclude, you all know what we do. Obviously we guarantee the debt, so you get a rating uplift, cheaper financing. But on the project finance side, these deals are living, breathing deals and very often we guarantee sizable chunks of project financing debt. So it gives the borrower, the operator an easier one-stop shop to come to you for an amendment or a waiver, even if we don't guarantee majority of the debt, if we guarantee a big chunk, it's still fewer investors that they have to reach out to. And of course, we do a very deep dive on the diligence side. We can't come off of these deals, we can't trade out of them, so we really do a deep dive. So sorry for the long.



Caitlin Devitt (06:14):

No, it's interesting. Yeah. Well, Nick, you guys are a co-manager on the recent Bright Line Florida financing. So I wonder if you would kind of break down the deal a little bit and talk to us about how it did.



Nicholas Donias (06:28):

Yeah, so there is about four different pieces to the puzzle for them refinancing all their debt at the opco level, and it really was a journey from how do we take this project that was construction for a period of time and had an investor base unrated bonds to this mix of a capital stack. And one piece that was already there was the PABs allocation. And so I think there was around a $3 billion PABs allocation. And so that was one piece of the puzzle. And then it was breaking out what could be rated investment grade versus the rest of the capital that needed to be raised for the refinancing, there was about 4 billion of debt that they needed to refinance. And so thanks to some people here on the panel, around 2 billion I believe it was, was 2.2. 2.2 was rated investment grade. And so there was an existing investor base of these unrated bonds.



(07:28):

And so it was filling that gap of going from operations, getting investment grade to issuing that amount of debt. That was probably one of the easier parts. There was the belief of people will take this train. One thing was around the timing, there was an eagerness to refinance as soon as they opened. They opened for operations in September of last year. And as we started to market this refinancing, folks want to see more traffic, of course, are people going to ride this train? And luckily every month after month, there was that increase that you're hoping to see. So during construction too, there was these other investor pools that they tapped into. They had a private placement, a small amount, and so that kind of tested the grounds for is there a private market here? And so another piece of the puzzle was outside of the muni debt, what in the taxable market is the appetite for this paper?



(08:33):

And so they had a high yield bond as well that was marketed and financed. And then the last piece was, oh, there's two more pieces. A bank facility that was at a HoldCo level as well as HoldCo bonds. And so I am surprised they got all these pieces together, but it was really the journey of speaking to investors very early on, taking folks to ride the train, seeing that people are in the seats and this bright line experience, it's not the Amtrak, it's not any other subway system. Once you go into one of these stations, it is a different experience and bringing that feeling of you're going to Europe or going to Japan and riding a high speed train, it is another level of an experience. And so I think once investors start to see that, see the story, all of those pieces came together and surprisingly they went out with a little bit under their targets and was oversubscribed. And why Brightline is probably not here right now is that they're closing all of those pieces on Thursday. So there was significant demand for all those pieces of debt.



Caitlin Devitt (09:48):

Yeah, I think Ride was part of the, they had investors come and ride it, ride a site visit I think was part of it. Sam, how did you guys get comfortable with it? What was important to you as you kind of analyzed it and considered it?



Sam Nakhle (10:06):

Well, yeah, we rode the train.



Caitlin Devitt (10:08):

Wait, I'm sorry, I just want to interrupt one second. You own 51% of the senior tax exempt, right? Correct. Okay, I just want to make that point. Yeah,



Sam Nakhle (10:18):

Yeah. Well, we rode the train, we saw that there were people on there and we went and asked them to make sure they weren't being paid by Fortress and they weren't. But so to echo what Nick was saying, so the senior Opco debt was 2.2 billion. We guaranteed 1.13, so that's 51%. We wanted to have a majority here if we were going to guarantee a significant chunk of debt just to have the control. So that was kind of an important to us. But the deal launched, as you said, it was been hanging out there, but it finally launched the beginning of this month price about two weeks ago and is supposed to close on Thursday. And yeah, we have been on calls with Morgan Stanley and Brightline including last night, but the senior piece was really well received, seven plus billion in orders, 85 unique accounts.



(11:12):

It was really, a lot of people came in because of our involvement. So we were really thanked up and down by Bright Line Fortress and Morgan Stanley. So it was a great result for us. So how do we get comfortable? So we've been looking at Brightline and we recognize it was operating. Obviously there's not a lot of history on the long distance piece. They just opened Orlando in September. They have had the short distance piece from Miami to West Palm Open since 2018 with a brief stop during Covid for about a year. One of the things we looked at was just, okay, what are the assets here? Who owns the assets? So the operating company that issued the investment grade rated debt owns all of the assets or has perpetual easements or rights of way on all of the assets, which this project has been in development since 2014.



(12:12):

And at cost, the value is estimated to be roughly 6 billion. Brightline will tell you it's like eight to 10 now, but even if the asset, it's a full operating 235 mile train system, so you're not going to break it up, but you still have the value could go down significantly and you're still covered on the senior debt side. So that was one of the things we looked at. Again, not typically how this is a unique asset, it's not something we do every day, but we looked at that and we're like, okay, that's a good starting point for us to get involved.



(12:49):

And then we looked at the ridership and revenue, the short distance, long distance. Obviously there's tons of reserves here. So just at the Opco level you have over 500 million of reserves. You have funded interest for two years, you have a ramp up reserve, you have project, you have multiple reserves, debt service, reserve fund, so you really don't need to cover debt service for another two years. And really you could push it out even three more years during this ramp up phase and still not have to cover debt service at the senior level. So we looked at the projections, we looked at what Brightline was projecting. Obviously Brightline is assuming by 26, 27, 28, there's going to be enough ridership and revenue to cover debt service at the operating company level as well as the parent code debt, taxable debt and the co tax exempt debt. But you can and Bright Line is, so you can haircut that debt significantly by up to half and haircut the projections, I'm sorry, by more than half and still cover debt service at the senior level.



(13:56):

So we kind of looked at that as our starting point. Again, where's the ridership today and how much growth do you need? And I mean just since October their growth has been 40% in revenue. And so we looked at kind of the CERs that you would need to get there once you get out of the CAPI period, and then also if you had to keep using the reserves. And we got comfortable with that. We also looked at the fact that one thing that was important, again, looking at the fact that the operating company owns all the assets, we wanted to make sure that it was separated sufficiently from its affiliates that if something did happen and bankruptcy, we have a lien on all the assets and it wouldn't get wrapped up with all the, if you look at the org chart, it's pretty complicated. It wouldn't get wrapped up with all the other fortress entities. And again, it's not a guaranteed bankruptcy is always messy, but still we got pretty comfortable that the assets are separated in Opco and that was basically our thesis. Okay,



Caitlin Devitt (15:02):

That's a lot. So Maria, how do you guys view the project? I mean Sam talked a little bit about ridership projections. Were yours the same as the companies and what do you sort of view high level as sort of the strong points and possibly the risks?



Maria de Urquijo (15:21):

Yeah, no, it was not the same. Basically we start with the sponsor's case and build our own assumptions and make a few adjustments. So we have a more conservative, a considerably more considerative rating case assumption in terms of ridership, both for the short distance and the long distance overall, I think we were hairing from the sponsors case both the ramp ups and the long-term. So overall we're about 20% on the steady state below the sponsors forecast. And that's also what brought us or gave us a lot of comfort in, especially on the rating level that they were targeting. In terms of the risks and the strengths on the project, I think a lot of it has already been said, but the main risk in this type of project of course is volume. So again, the ridership is basically the main point. We spent a lot of time talking to the company, checking with the forecast and kind of back and forth.



(16:27):

And also looking into the history from 2018, although it was like you had covid there, but looking at the history and see how much resiliency there is, what was the recovery after COVID on the south segment, does it make sense? And then adjusting all of those things. So I think that's basically the risk over the long term and considering these debt is, especially the tax exempt goes through 20 53, 20 54. So you have to make sure that you have a good forecast and you feel comfortable on the long-term because otherwise if the ramp up doesn't materialize or doesn't happen as we're expecting, then we'll be having a long-term problem. So that's why we were much more conservative than the sponsor on the ridership. We still feel comfortable with it. And the strengths, I'll just be very brief and echo what Sam said because it's basically you have operating history on the south segment already, which shows a little bit of how will the ramp up behave, especially considering Florida, the region, et cetera. So that was one of the things and the ample liquidity on both of the tranches that we rated, there was a lot of liquidity put in place and lastly, there was no construction risk. We were already past that phase. That's one of the things, especially when you look at something with the project financing glass is one of the things that you want to make sure what's the construction risk about? And here we were gladly past that hurdle. So I guess those were the



Caitlin Devitt (18:10):

So we're past the hurdle to Orlando, but now they have this Tampa, the proposal on the table, which was I think the 925 of tax exempt unrated papers going to finance that potentially. Nick, can you talk about that at all? Do you have any details on that? Yeah,



Nicholas Donias (18:34):

They have a right to, well, they own all the alignments, but they've been talking to a lot of the counties to expand to Tampa and it was very interesting. I got to ride the first train from Miami to Orlando and one thing that Brightline has done very well is have all the political engagement from the very local up to the federal government and the mayor of Tampa, local representatives of Tampa kept on saying, we're next. We can't wait for this to come to Tampa. So the odd structure about the HoldCo is that it doesn't go to finance Tampa, it's just secured by the right of when Tampa is built. So there's some value of that alignment that expands out to Tampa that is backing the HoldCo piece. Some of the plans of financing that is probably getting more allocation in the pad market financing that with municipal bonds as well. As I said, the local support, they've had found unique ways to monetize their alignment. There's some commuter, there's some commuter segments in Broward County and Miami-Dade County that they're able to sell those alignment rights to those municipalities and monetize that to help go finance things like new stations expansion out into Tampa. And so it's kind of like an all of the above approach when they look at as we expand westward, how do we think about financing this?



Caitlin Devitt (20:05):

Okay. Anything anybody else wants to add about the Florida before we move on to other projects?



Sam Nakhle (20:13):

No, I just echo what Nick said about Tampa. So there is an option for the operating company to purchase the Tampa asset at some point, but obviously they would, there's some additional debt tests they would've to meet in order to fold that in. I mean that's ultimately their plan is to fold in Tampa into the operating company and have it be one complete asset.



Caitlin Devitt (20:41):

Do we have a timeline on Tampa at all?



Sam Nakhle (20:44):

So it's shovel ready, right? It's in development. They claim what five years for it to be completed? I mean they've got most of the rights of way, so I mean I think they're in good shape. It's just a function of building the stations and including one that's going to be at Disney, right? So yeah, we're excited for them to continue and we think that'll improve the value of the asset overall. Yeah,



Nicholas Donias (21:17):

I would add one thing though, but looking at the current alignment from Orlando to Miami is just, I was curious about how y'all two look at it too, but the station is at Orlando airport, which is just critical of capturing folks that are going to take that train flying into Orlando are going from Miami, going into Orlando and having accessibility to people say, are folks going to get out of their cars and ride this train? Yet the places that they pick their stations have been just so critical to showing that yes, people will, because even if you go into Orlando and rent a car, it's there at the airport or you go in Orlando and want connectivity into Disney into the theme parks, it's either going to be the stations that they build, there are, there's already connectivity. Disney wants you to use their shuttles to go to Disney. They don't want you to have a car, they want you to stay at Disney. So that's just been a very smart thing that the Brightline team has done and not building a station outside of Orlando in the middle of not a core location.



Sam Nakhle (22:22):

And I would say because they're also a savvy private company, they've been getting into the booking. So when tourists will book flights from say Europe, they can also book the train as well. Their app is pretty good and you can also book Ubers through their app. So they're pretty savvy in terms of getting a lot of touch points with different people and getting them improving the convenience of the asset.



Caitlin Devitt (22:53):

I'm sorry, Maria, did you want to say something?



Maria de Urquijo (22:55):

I think they covered everything.



Caitlin Devitt (22:57):

I just wanted make the point also though that this actually, the train isn't technically high speed, right? It's like fast



Nicholas Donias (23:06):

Higher speed



Caitlin Devitt (23:07):

I had a tough time figuring that out when I was writing it. I was like, what do I see?



Sam Nakhle (23:12):

I think high speed supposedly according to the association, high speed is 155 for a new track and it's 124 for a refurbished track or something like that. I mean the bright line trains can go like 190 miles an hour. Oh, they



Caitlin Devitt (23:31):

Can the track the technology.



Sam Nakhle (23:33):

Yeah, they can do it. The issue is the at grade crossings and the regulatory bodies aren't going to let them go that fast. They can go up to 125. As you get outside between Cocoa and Orlando, there's fewer at grade crossings and they can actually go up to 125.



Caitlin Devitt (23:55):

They have had a lot of accidents.



Sam Nakhle (23:57):

They have. Yeah, I think in part because people aren't used to the train, a lot of the accidents have been people trying to drive around the gates. There's been some suicides too, but yeah, you're right, it's been in the press.



Caitlin Devitt (24:14):

Okay, so the Bright Line West Projects, which is also backed by Fortress broke ground a couple of weeks ago and that was Buttigieg was there, all the state, local, federal people were there making a splash. And Buttigieg says this is going to be the first high speed rail project, I guess assuming it gets online before California, which is very behind the Bright Line West is from Vegas to kind of a suburb of Los Angeles and they want to get that up and running by 2028 in time for the LA Olympics. It's a 12 billion project. Does somebody want to provide guys, can you provide an overview of all of the financing or the project? Sorry to kind of ask that spontaneously, but yeah,



Nicholas Donias (25:05):

So they're in the process of developing Bright Line West. They had a groundbreaking, more so ceremonial because the federal government through the last infrastructure act granted 3 billion to help support the financing of the project. It's 12 billion and so a part of that remaining capital stack is going to the bank market, which us along with Morgan Stanley are leading structuring that financing about a 6 billion bank debt and then the rest in the municipal market. And so that is well underway of speaking to the banking community, speaking to the rating agencies I'm sure, and I think as I said for Florida, they have a great roadmap blueprint of getting West done, although Florida was done a bit piecemeal at a time, multiple financings, the south segment, the long distance segment here, they look to finance all of it from Rancho Cucamonga to Las Vegas all in one go, which I think there's already a model in place for doing this. We just had two large terminal projects, the JFKT six and T one where we saw a significant amount of the bank market take on construction risk and ridership risk, although an airport that is already operating has more history to look at. I think the Florida project will really speak to their ability to construct a project like this as well as the demand of the ridership story of Las Vegas to LA.



(26:48):

I've been out to Las Vegas many more times than I would like in the past, a few months seeing the site that they have. And I think there's going to be that demand story too. Folks are going to get out of their cars. And one thing too about the project, the alignment, it's along the I 15 interstate and so it advertises itself. You're going to be in bumper to bumper traffic going from driving from Los Angeles to Vegas, and you're going to see a train just speed right by you and say, why am I here? Let me go take that train. So it's well underway and I think they're going to meet their timelines



Maria de Urquijo (27:25):

And there's also going to be a lot of lessons learned from for that they will be able to implement I guess on West, or to your point, it might be easier



Nicholas Donias (27:35):

This time. Can I ask how you are viewing the construction risk versus rating Florida and operations?



Maria de Urquijo (27:42):

I guess that's kind of the difference of Florida and I'll put it another way. What makes different Bright and Florida from other developments in high speed rail in the country? I guess that's that right? Brightline Florida had two different things. One, even if we looked at it during construction, the difference with Bright Line Freight, that was a big portion of it was already built. The rails were there. So that decreases or reduces a lot the complexity of these types of assets being built. When we look at construction and what's the EPC or the multiple EPCs in this case and et cetera, we know that that was the case with Par and Florida. That or it gives you a little bit more comfort in terms of, and I think it's also the same for you as investors where when you see something that is not necessarily breaking ground and the right of way was there, et cetera. What I know from Bright Line West is, I guess since it's going to be in the median of I 15, it might be also easier. You might still have a few hurdles in terms of right, right of way to solve, but it's not as other projects that are being developed in Texas, for example, where you do have so many different pieces of of way that you have to clear out. So I guess that's kind of the main difference that I would see.



Caitlin Devitt (29:07):

Or California, I mean that's part of what, what's really complicating the California project is tunneling and all these kind of things. So do we have a timeline on when they might be coming to market Bright Line West



Nicholas Donias (29:21):

I think they want to in earnest ramp up construction end of summer, early fall. Is there a timing?



Caitlin Devitt (29:30):

So that would probably be about the same time they might come to market then.



Nicholas Donias (29:33):

Yeah, they would look, I think they take, as I said, all above approach that I think a significant chunk will be done in the bank market yet they also have this allocation. I think they have almost over two and a half billion of private activity bond allocation, which they'll put to good use, whether it's at a rated piece or unrated piece.



Caitlin Devitt (29:57):

Yeah, they have 2.5 billion and they have the 3 billion of the feds and then 6 billion of bank. That's a lot of money. Sam, does it affect you at all the Bright Line West and your guys' thoughts about Bright Line Florida or just generally what are you thinking about Line West?



Sam Nakhle (30:11):

I mean obviously again, we want to make sure that the operating company in Florida was completely separate from all the other affiliates that were not completed or are under construction. So we did look at that, but I mean in general we think Bright Line West is good for the brand, it's good for a bright line Florida, just the recognition and also the fact that as you guys are pointing out, they've already got most of the rights of way. So we think it's a good story and it'll be actually high speed because you don't have all the accurate crossing. So no, we like it in terms of it being good for the overall brand of Brightline, but we wanted to make sure it was separate and distinct from the operating company.



Caitlin Devitt (30:56):

And it's going to be electric, I think it's electrified.



Nicholas Donias (30:58):

Yeah, a hundred percent electric renewable energy source from the utility. They have a power purchase agreement and just I think overall going to be have a very good ESG story, which I think different from Florida where there's some limitations there on ESG.



Caitlin Devitt (31:21):

So at that groundbreaking, Wes, the head of Fortress talked about how it was interesting, he talked about how we're, he thinks that we might be starting a high speed rail industry in the US or he to, he thinks that the ground has been laid for that or it's sort of ripe with all these different twin cities. He even talked a little bit about Texas and the Texas Central project, which has been kind of long struggling. Nick, not to keep relying on you, but you guys were financial advisor. I mean you were an advisor to the Japanese government in an earlier iteration of



Nicholas Donias (32:00):

Yeah.



Caitlin Devitt (32:00):

If you could just give us an overview of Texas Central, where it's at and where it might be going.



Nicholas Donias (32:05):

So the initial view of Texas Central is all private development equity from private folks in Texas and with support from the Japanese government through JB, it's like their export credit agency. And Sumitomo was advisor to JB and entity that does direct lending. And the why Japan was involved is because they wanted to bring the Ksan technology, the High Speed rail in Japan over to Texas. And as West Eden says, there's these areas that are too long to drive too short to fly, which I'm from Dallas, I take the trip to Houston often, I hate it. It's four hours driving a waste of time versus being able to sit on a train and be a bit more productive. And so while we're advising, they made a lot of progress on selecting construction contractors, selecting train systems, selecting the o and m provider and having teach-ins on all these pieces of them fitting together.



(33:07):

I think the one problem that really kind of killed this initial phase was the whole ride of way discussion as they were going through getting all the segments along the way from Houston to Dallas, they ran into a large farming community that challenged their, not to get too specific, but their ability to use eminent domain because they weren't a quote operating company, their A to be B high-speed rail company, but not a current. And so they challenged with the Texas Supreme Court if they could use imminent domain. I think time ultimately killed that process. They ended up winning and the judge sided with Texas high-speed rail saying that they do have the right to use imminent domain. And so it ended in a pretty sad place that they have the full alignment now. Yet the time just kind of killed the support of the project.



(34:05):

I think the second piece that was critical that didn't get done was that the current prior administration wasn't in deal making mode saying that we'll either give you a permit or we'll give you a grant, but not both. And so when there's not that alignment of having that public support, both from the state who wasn't backing the ag was challenging the right to use imminent domain as well as the federal government, these projects won't get done. And now there's a different story, there's projects to point to that are successful as well as an alignment of, at least on the federal piece, the support, the funding to give to Texas High-speed rail. I think as of now, there's value in that project. There's an existing alignment now it's just for someone to come up and execute on the construction of that project.



Caitlin Devitt (34:58):

And Amtrak said last year they're coming in or they want a partner. And Wes Eden, I might've just said, talked about possibly going in there. So Maria, from a ratings perspective, there's these different, and this new book that just came out about the northeast, the development of the northeast train corridor and how it all sort of started as all these different projects that kind of reminds me of that, but before it eventually became the corridor that we know now, as from a rating perspective, what's important to you or can you kind of talk hypothetically about what would be some of the top things you would look at for some of these projects?



Maria de Urquijo (35:36):

Yeah, sure. So I guess mean one of the first things that we would ask about is what's the right of way? So construction would be one of the main things and the things that we would start with there. We want to make sure that the right of way is clear or these are the things that would impact me eventually where you can shake out in terms of a rating. So what's the right of way? What is construction? What are the construction agreements, how is it going to be done? I mean, in project finance we usually see a single contract, but in high speed trail we know that there's usually not a single contractor. There's different pieces of contractors. So it's more about understanding who bears the risks and who bears the obligations in terms of what if there's a delay, et cetera. So all of that in terms of the construction is very important from the project financing perspective.



(36:33):

And how much liquidity is there for this deal? No, I mean we typically see some of these projects facing some delays, nothing material, but you can phase two, three months of Adela in opening starting revenue commencement. So we want to make sure what is in place, what's the liquidity, sorry, the contingencies, is there bonding in place, which is also something typical for project financing. And from there the other, I guess the other big piece is understanding the market, right? Where are you building the train? What are the cities that you're trying to connect? What's the catchment area? What is eventually your market share? What are the implications? Who is your main competition? I mean, how much, which was, to be honest, one of the surprising things here when we started looking at Priceland, it was like, it's Florida, they love the cars. How is this going to work?



(37:40):

And it's been really surprising, honestly. I mean, we have used the training during commuting hours in some of our visits and it's packed. There's packed, packed, there's a lot of passengers, a lot of scooters. So it's actually nice to see that there is a change, honestly, from a personal point of view and just with the faith I still having in humanity to see a lot of people actually getting off of the cars and jumping on some computer service. So yeah, I guess those would be the main two things and where we would start. And of course the transaction structure. What are the liquidity portions you're putting in place, especially if you have ramp up, if these are greenfield projects, what happens if the ramp up is not as you expected? So very similar to Priceland, I think in that scenario or in that sense, they did check all of the boxes that they made sure to bring comfort to everyone and all the different parties in these types of scenarios. So I think those would be the first three things that we would look at.



Caitlin Devitt (39:01):

So Sam, can you see you guys getting involved in other high-speed rail projects or is it just too speculative to you even ask that



Sam Nakhle (39:09):

Maybe? Let's see how bright line goes. Yeah, potentially. I think one of the issues is having it be operational, albeit relatively new. The ridership on the long distance segment's, not proven yet, but at least it was built and operating. I think as we've discussed, one of the biggest issues is just the rights of way. So even if you had that and it was under development, maybe we would have to have all the rights of way and it would have to be a good story. I mean, we think the bright line West is a good story, so potentially we'll see. .



Caitlin Devitt (39:48):

Okay, well I have a couple more questions, but also if anybody has any questions they want to ask, you can step up to the microphone and let us know. Oh, here comes one. Okay,



Audience Member 1 (40:03):

Good Morning. Good Morning. How is these air taxis are going to start? So I'm from Georgia and we just built a facility in Covington, Georgia that's going to build 650 air taxis in the next year. The first one's going to come online next year. And so high-speed rail in Georgia will probably be antiquated pretty soon because, and I'm saying this, you guys don't know me, I'm the minority lead in the state of Georgia and the governor and I had a big conversation about high-speed rail going from Atlanta to Macon to here to Florida, and our conversation actually moved into these air taxis and that they're going to start to disrupt this market high speed rail. Have y'all factored that into this equation because these vehicles are going to come online next year in Georgia. So how does that play into the deal flow with high speed rail?



Caitlin Devitt (41:07):

Wait, you're going to have the train, people will be going like ha to the cars and then the air taxi guys are going to be going flying by the window.



Nicholas Donias (41:16):

I think from what I understand of these air taxis, that they're more personal vehicles that I think train is still a different story versus one to two people in this air taxi that you still need an operator that knows how to operate this vehicle. And it's very point to point, I'm not sure, from what I understand is some of the point to points are not very long distance that they're kind of shorter medium distance. And so a train is still going to be the most efficient, environmentally friendly way to transport from one, a large mass of people from one end to the other. And I think that's why it'd still be fit into this mass transit category. It's really going to be the alternative of a car versus plane. And maybe at some point too, it's going to be about how different is a car getting a schedule to go to this air stop. I'd say as of now, it's not the part of the analysis of a risk of ridership because it's not here yet, but it's like when we would analyze tow roads, there's all these conversations about autonomous vehicles, and yet that was like five, six years ago and we still haven't seen, we're still very far off from getting autonom vehicles on the road and these whole roads are just doing very well on the managed lanes projects.



Sam Nakhle (42:43):

Yeah, I would agree. I mean it's interesting. I think it gets me excited for somebody who lives in New York, but I don't think, it's not a proven technology. It's what kind of capacity is it going to have relative to a train and what kind of distances is it going to be going? As Nick was saying, it's probably shorter distances than a High Speed rail, so it's not something we looked at as being a major risk to our analysis of the ridership on Bright Line, just because it's still not proven. I mean, we looked more at autonomous vehicles on the road versus some new venture like air taxis



Caitlin Devitt (43:30):

What's the difference in price might make it not.



Sam Nakhle (43:33):

Yeah, right. Very comparable. No, yeah, who knows what's the price point going to be on the air taxi? It's probably going to be, at the outset it's be a lot more expensive, I would imagine, compared to the train. So



Caitlin Devitt (43:43):

Are you saying in Georgia that Georgia actually the air taxi thing sort of put a cramp in the political desire for high-speed rail?



Audience Member 1 (43:57):

Yeah, I think so. And I mean the plant, it's in Covington, Georgia, they just started, they broke ground this year. The first air taxi is going to come online next year. And the cost to go from Atlanta is crazy. You guys been there to traffic, but you can go from Gwinnett to the airport, they'll have short distances for the same amount is what you would pay for Uber. And so that's factored into the deal. The name of the company is Archer, Archer Aviation. I think Joby is doing one as well. And so try to rightly align and it's going to be short distances as well, but how does that factor into spending 12 billion on high speed rail when you have potentially these air taxis flying from in short distances in places where there's a lot of congestion? I think it's going to be very disruptive. And so anyway, I'm just trying to figure out how this plays itself out over the next 10 years, given the fact that Georgia's going to definitely come online with, and they're going to be autonomous as well, so not the first ones, but there'll be autonomous flying vehicles from different forces.



Caitlin Devitt (45:06):

So no cabbie behind the wheel for some reason. It's funny to me. Okay.



Audience Member 2 (45:13):

So Sam, you mentioned the legal separation between the Opco, the parentco, the HoldCo. I'm wondering if you could talk a little bit more about the interconnectedness of the three separate financing structures, maybe not so much from an asset lien or equity ownership or the cash waterfall, but more along the lines of some of the negative covenants that say in a scenario where ridership and revenues are significantly less than what management expects, how that may limit your ability to say in a stress case scenario, take action. And then maybe as a sub question also for you, can you be diluted out of your 51% or do you have rights for any additional future issuance or say when or if the day comes where the Tampa expansion is or the debt from the Tampa expansion is all underneath the same opco, do you get the first right to ensure that to maintain your 51%?



Sam Nakhle (46:25):

So I'll start off with your first part in terms of what Parent Co and HoldCo can do if their debt is in distress, so the holders of that debt, they can foreclose on the equity interests, they can foreclose on HoldCo and Parent Coco and the HoldCo and Parent Co Ultimate equity interest in Opco, but they can't do anything beyond that. So that's something we looked at very closely to make sure that Parent Co and HoldCo, to the extent they were in distress, that they couldn't foreclose on, they couldn't affect the operations of Opco, they couldn't force Opco into bankruptcy. So they're pretty isolated from Opco. So yeah, that was something we looked at pretty closely. So we guaranteed the longer maturities. So our percentages, again, assuming the current debt structure will go up over time, I'm not sure what I can discuss in terms of, yeah, we may or may not have a right of first refusal to look at and we can always, even if we didn't and they were issuing new debt, we, we always have the right to guarantee that additional debt. Right. Assuming the pricing works out. Did I answer your questions?



Caitlin Devitt (47:49):

Okay. It's like going, oh, now it's going. That's over. Anybody else have any questions? Okay, well thank you so much. Thank you for your attention and thank you for.