Write the recommendation

Company overview

Brightline is a privately owned and operated intercity passenger railroad [E1]. OpCo runs trains on about 235 miles of double track between Miami and Orlando International Airport, with stations at Miami, Aventura, Fort Lauderdale, Boca Raton, West Palm Beach and Orlando. South of Cocoa it shares the Florida East Coast Railway corridor under a perpetual passenger easement; the 40 miles from Cocoa to the airport are passenger-only and leased from state and airport authorities [E1,E10]. South Florida service began in 2018, was suspended from March 2020 to November 2021, and the Orlando extension opened on 22 September 2023 [E1].

OpCo earns money from fares and from food, beverage, parking and other ancillary revenue; it has no availability payment and no government revenue guarantee. Demand risk sits entirely with the lenders. In the twelve months to June 2026 OpCo carried 3,358,022 riders, 1,993,873 of them on long-distance trips to or from Orlando, and booked $232.1M of revenue at an average fare of $55.63 (Exhibits 1–3). Growth is steady: riders rose 17.9% and revenue 22.4% year on year in the second quarter of 2026. The trailing-12-month figure to July 2026 was 3,391,938 riders; annualising the first seven months of 2026 gives 3,564,110, a figure that ignores the strong first quarter.

The 2024 financing. In May 2024 OpCo refinanced through $2,219.3M of tax-exempt Series 2024 bonds issued by the Florida Development Finance Corporation (FDFC). Assured Guaranty insures three term bonds totalling $1,133.4M; the other $1,085.8M is uninsured. Coupons are 5.00%–5.50%, interest is paid on 1 January and 1 July, and maturities run from 2034 to 2053. The parents raised more debt against their interests in OpCo and in planned extensions: $925.0M and $285.71M of AAF Operations Holdings (HoldCo) bonds, $985.0M of commuter bonds and $1,118.8M of Brightline East notes (Exhibit 5).

What went wrong. The official statement projected about 8.0 million riders and $695M of ticket revenue by 2026 (Exhibit 4). OpCo's auditors expressed substantial doubt about its ability to continue as a going concern in the FY2025 statements [E7]. On 1 January 2026 OpCo used its debt service reserve to pay bond interest [E8]. From May 2026 it raised bridge notes at a 70% issue price, and the HoldCo and commuter bonds went into repeated grace-period extensions [E3]. On 24 September 2026 seventeen parent entities filed prearranged Chapter 11 cases in New Jersey; OpCo did not file [E10,E14].

The RSA. Assured, the MFG and other creditors signed the RSA on 25 September 2026 and amended it on 29 September 2026 [E2]. It keeps every bond's principal and the Assured policy in place. Consenting OpCo bondholders defer three coupons to 1 January 2031. OpCo raises $490.0M of exit notes: the $140.0M first-lien notes in this case and $350.0M of second-lien Junior Exit Notes, whose buyers receive 95% of New HoldCo. Until exit, OpCo runs on a $257.7M in-court Senior Secured Brightline Facility at 10.0% PIK plus an 8.0% fee (Exhibit 6).

Management. OpCo has no employees; an affiliate, Brightline Management, runs it under a management agreement. Entities managed by a Fortress affiliate indirectly own a majority of the parents [E10]. The case uses no individual names.

Demand drivers are South Florida population and tourism, airport traffic at Orlando, highway congestion on I-95 and the Florida Turnpike, and fares. The 2026 monthly reports show 88% of riders are Florida residents (July 2026) and about 36 departures a day [E3]. Riders and revenue are seasonal: the first quarter is the strongest and the third the weakest (Exhibit 2). The nearest competition is driving, air between South Florida and Orlando, and intercity bus.

The credit market has already priced the restructuring. On 28 September 2026 a $139M block of uninsured senior OpCo bonds traded at 45.5, against 64.0 on 8 April 2026; insured OpCo bonds traded at 95.6 on 2 October 2026; and the 12% HoldCo junior bonds due 2059 traded at 5.37 and 8.0 on 5 October 2026 and 6 October 2026 [E9]. Fitch cut the OpCo bonds to C from CC on 1 October 2026, calling the RSA a distressed debt exchange [E9]. In corporate private credit, the direct-lending spread premium over broadly syndicated loans was about 155bp on a trailing-12-month basis and 140bp year to date at 30 June 2026 (PitchBook LCD data cited by Portage Point) [E13]. Rates: the Federal Reserve raised the fed funds target to 3.75%–4.00% on 16 September 2026 [E12]; 1M CME Term SOFR was 3.925% on 9 October 2026 [E11].

Your memo should answer

1. 01Forecast against actual. Using Exhibits 1–4, compare actual riders, average fare and total revenue for FY24A, FY25A and the twelve months to June 2026 (LTM Jun-26) with each official-statement ramp-up scenario. Split the FY25A revenue shortfall against Scenario 2 into a volume effect and a fare effect, and say which, if any, of the published projections is still a credible base case for a 10-year note.
2. 02Coverage and the cash-pay test. Define the EBITDA you would use for the FCCR (state your basis: train-level or after corporate costs, LTM Jun-26 or FY25A) and compute the FCCR at exit on fixed charges of OpCo bond cash interest, Citizens interest at 1M CME Term SOFR of 3.925% (9 October 2026) plus 2.00%, and Pari Passu interest at 8.5%. Then solve for the EBITDA, revenue and riders needed to reach the 1.30x cash-pay trigger, the year OpCo might reach it on a growth path you justify from Exhibits 2 and 10, and the accreted value of Halyard's $50.0M at maturity if interest is paid in kind throughout.
3. 03Relative value. Compare the 8.5% PIK notes at par with the yields implied by OpCo's own uninsured and insured bonds at their quoted prices, the in-court facility, the bridge notes, the Junior Exit Notes and the private credit premium (Exhibit 7). Address the tax-exempt versus taxable comparison and the fact that the traded maturity is not disclosed. State the yield Halyard should require for this risk and what it implies for price or coupon.
4. 04Downside. Stress OpCo's cash flow for (i) riders and fares staying at their LTM Jun-26 level, so the gap to the official-statement forecast persists; (ii) the worst quarter since Orlando opened (Exhibit 8), annualised; and (iii) the forward curve 100bp higher. For each, report FCCR, cash burn against the $125M sweep threshold, and the recovery on the Pari Passu notes under an enterprise value you justify from the bond prices in Exhibit 7.
5. 05Structure and documents. Assess where the notes really rank: against the insured and uninsured OpCo bonds, Deferred Interest, the Citizens facility and the Junior Exit Notes; Assured's control and consent rights; the sweep mechanics; and the gaps in the term sheet. Size a counter-proposal: what changes to ranking, coupon, cash pay, fees or equity participation would make the ticket acceptable, and would your answer change if Halyard also bought Junior Exit Notes?
6. 06Recommendation. Commit, decline or counter. Give hold size, pricing and the conditions precedent, the diligence you still need before the plan effective date, and what would change your view.

Financials ($M)

Term sheet

Facility

$140.0M notes, plus incremental notes to fund up to one third of any deferral shortfall (below). Assured insures or buys $70.0M; the MFG lenders and any additional consenting OpCo bondholders backstop $70.0M, severally (Halyard allocation of $50.0M HYPOTHETICAL)

Issuer and guarantors

OpCo (or a conduit issuer). Guarantees not specified; New HoldCo pledges 100% of OpCo's equity

Ranking and security

Pari passu first lien on all collateral securing the OpCo bonds. Senior OpCo Debt = OpCo bonds (including Deferred Interest), the Citizens facility and these notes. Debt service reserve accounts may secure only their own series. Junior Exit Notes rank second under an intercreditor agreement with a standstill

Tenor and maturity

10 years from closing. No springing maturity: the OpCo bonds mature 2034–2053, but Deferred Interest falls due on 1 January 2031 and the Citizens facility needs an extension

Pricing

8.5% fixed, PIK; cash pay once FCCR exceeds 1.30x for at least 12 trailing months. No floor (fixed rate). No OID, upfront or ticking fee stated. Insured notes: rate plus Assured's 2.0% annual premium may not exceed 8.5%. Tax status of the notes not stated

Call protection

Not stated, except that sweep prepayments carry no make-whole; Assured's premium carries a make-whole

Amortisation

None stated

Financial covenants

None stated. FCCR is a cash-pay test only: fixed charges include interest on these notes and exclude the Junior Exit Notes; the full definition will be in the definitive documents

Key negative covenants

No new first-lien debt beyond the OpCo bonds, the Citizens facility (or its refinancing), these notes and incremental notes for a deferral shortfall, without consent of the Required MFG Parties and Assured. More junior debt allowed with majority junior consent. Existing bond covenants limit additional debt and distributions

Mandatory prepayments

Excess cash flow sweep of liquidity above $125M for 13 continuous weeks, tested weekly, applied to these notes if the bond documents allow, otherwise to all Senior OpCo Debt until an equivalent amount is repaid. The sweep does not start until all Deferred Interest is paid in cash

Reporting

Not stated for the exit notes. OpCo publishes monthly ridership and revenue reports and files on EMMA; the in-court facility requires 13-week cash flow forecasts and variance reports

Debt service reserve, lock-up, distributions

Existing senior debt service reserve of 12 months secures the OpCo bonds only; none stated for these notes. Distribution tests: Total Senior DSCR 1.30x and Total DSCR 1.10x, with an equity lock-up account (2024 documents)

Deferral shortfall

If insured holders do not defer and OpCo cannot pay their coupons from cash through 1 January 2028, up to 50% of the shortfall is financed: one third with incremental Pari Passu notes (Assured) and two thirds with incremental Junior notes

Voting and control

Deferred and PIK interest do not count for voting. In the in-court facility Assured directs 50.1% of the vote; Assured and the Required MFG Parties consent to most amendments

Conditions

Plan confirmation and effectiveness for the OpCo parent (BLTF Holdings); Supporting Holders agree the Deferred Interest Treatment before 1 January 2027

Exhibit 4: Official statement forecast (Scenario 2) against actual ($M unless stated; OS April 2024; actuals from monthly reports)

2025 passengers: forecast / actual

7.4M / 3,116,323

2025 total revenue: forecast / actual

$677M / $214.0M

2025 average fare: forecast / actual

$79.16 / $55.59

2026 passengers: forecast (all scenarios)

8.0M–8.2M

Riders, trailing 12 months to Jul-26

3,391,938

2026 Scenario 2 CFADS / net OpCo debt service

$620M / $117M

Exhibit 5: OpCo capital structure at exit ($M principal before PIK accretion)

Series 2024 bonds (insured / uninsured)

$2,219.3M ($1,133.4M / $1,085.8M)

Citizens revolving facility

$45.0M at SOFR + 2.00%

Pari Passu OpCo Exit Notes

$140.0M at 8.5% PIK

Deferred Interest (maximum)

$173.9M, due 1 Jan 2031

Junior Exit Notes

$350.0M at 10.0% PIK

Debt outside OpCo (HoldCo, commuter, Brightline East)

$3,314.5M

Exhibit 7: Pricing comps (prices per 100; dates shown)

1M CME Term SOFR (9 Oct 2026)

3.925%

Uninsured OpCo bonds

64.0 (8 Apr 2026) → 45.5 (28 Sep 2026)

Insured OpCo bonds (2 Oct 2026)

95.6

HoldCo 12% junior bonds due 2059

36.75 (Jan 2026) → 5.37 (5 Oct 2026)

In-court facility

10.0% PIK + 8.0% fee

Private credit premium over BSL (LTM to 30 Jun 2026)

155bp

Exhibit 9: Reserves and distribution tests (2024 documents) ($M unless stated)

Ramp-up / project / rolling-stock reserves at closing

$175M / $75M / $60M

Senior debt service reserve requirement

12 months of principal and interest

Distribution tests

Total Senior DSCR 1.30x; Total DSCR 1.10x

Cash / restricted cash (31 Dec 2025)

$1.4M / $136.9M