Brightline Florida hit with five-notch S&P downgrade

S&P Global Ratings Friday delivered a five-notch blow to $2.2 billion of Brightline Train Florida LLC's senior bonds and warned that it expects a default by January 2027.

The downgrade pushes down Brightline's so-called senior OpCo bonds to CCC from BB-minus. The rating applies to both unenhanced bonds and the underlying ratings of bonds guaranteed by Assured Guaranty (AGO), which wraps roughly $1.3 billion of the debt.

The rating agency also downgraded $1.19 billion of Brightline East's bonds one notch, to CCC from CCC-plus, and predicted default on those bonds as well by January 2027.

The outlooks for all the debt remain negative, which reflects "the exposure of the project to lower growth in 2026, which could bring forward the risk of default if the ridership or fare trajectory underperforms our forecast," S&P said.

A CCC rating includes an estimate of default in about a year.

The actions affect $3.338 billion of debt issued by Florida's privately owned intercity express train, which has experienced a rollercoaster ride in the municipal bond market.

Its struggles over the last year have sparked downgrades ? including from S&P in August ? and deep drops in bond prices that have dragged down the performance of some high-yield municipal bond funds. In November, Assured, which carries S&P's AA insurer financial strength rating, dropped its own internal rating to below-investment grade while saying it remains bullish on the future of the credit.

In 2024, the company, which is owned by Fortress Investment Group, overhauled its complex capital stack in a borrowing that restructured $5 billion of debt across three liens, with a mix of taxable and tax-exempt debt featuring subordinate and senior liens and the Assured wrap.

The deal lifted much of the company's speculative-rated bonds into the investment-grade category for the first time ? a move that some investors said came too soon. Fitch Ratings by May had dropped the credit back into junk territory.

S&P does not rate the $1.2 billion of unrated AAF Operations Holdings LLC bonds or $985 million of so-called commuter bonds.

S&P "sharply revised" its base-case scenario based on the train's performance during the second half of 2025, analysts said. "We believe the most likely path to default for both OpCo and the [Brightline East bonds] is that after reserves are depleted, they will default when each is unable to fully pay its debt service obligation on Jan. 1, 2027."

The rating agency said it assumes the debt will be restructured and that OpCo will continue to operate as a going concern rather than liquidating assets.

S&P dialed way back its future ticket revenues projections, to 15% in 2026, followed by 12.5% in 2027, 10% in 2028, 5% in 2029, and Consumer Price Index thereafter. That compares to prior forecasts of 38%, 17%, 11%, and 9.4% through 2029.

Brightline on Tuesday announced it plans to tap reserves to make a Jan. 1 debt payments on senior bonds. It's not clear whether it has sufficient liquidity to cover the payments.

The company has not offered details about a coming Jan. 15 payment on the subordinate bonds. It has the option to defer interest payments a total of three times on the subordinate bonds. When Brightline pulled that lever in July, it triggered price declines across bond tranches.

The OpCo bonds, which traded at par in January, saw an odd-lot trade Friday at 66 and a $15 million trade at 72 on Dec. 15, before the S&P downgrade.

Neither Brightline nor Assured responded immediately to requests for comment.