Fitch cuts Brightline Florida

Brightline Florida's passenger train was hit with another downgrade Friday when Fitch Ratings pushed $2.2 billion of senior debt deeper into junk territory and warned a default by mid-2027 is "highly likely."

The downgrade comes after the company tapped reserves to make a Jan. 1 payment on the senior bonds and deferred interest on a Jan. 15 payment on its unrated tax-exempt subordinate debt.

Brightline Trains Florida LLC's $2.219 billion of senior, so-called Opco, private activity bonds include $1.13 billion insured by Assured Guaranty (AGO). Assured did not immediately respond to request for comment.

Fitch cut its rating on the senior bonds to CCC from B, a three-notch downgrade that reflects "substantial credit risk and very low margin of safety as liquidity has depleted," ratings analysts said in a Friday downgrade report.

The outlook remains on rating watch negative. Fitch also cut Brightline East LLC's $1.119 billion senior secured taxable notes by four notches to CC from CCC-plus. The tax-exempt subordinate bonds that saw their Jan. 15 payment deferred are not rated.

The "ramp-up" period for the nation's only intercity express passenger train, which covers a 235-mile route between Orlando and Miami, "continues to fall short" of Fitch's cases, the agency said. "The addition of new train cars to address capacity constraints has not alleviated concerns that demand will rise sufficiently and quickly enough to drive higher ridership and fare revenue to cover near-term debt service," it said.

The downgrade "reflects the heightened probability of very near-term default, with non-payment beginning in January 2027," Fitch said. It expects Brightline to draw on its remaining debt reserves to cover near-term financial obligations this year. "However, Fitch believes these reserves will be insufficient to meet the January 2027 debt service payment."

S&P Global Ratings in December also warned of potential default on the senior bonds by January 2027 when it downgraded the debt by five notches. S&P 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.

Senior bond prices appeared relatively unchanged in a flurry of trades Tuesday.

Fitch said it believes Brightline will have sufficient liquidity to cover its July 2026 senior bond payment but that it would deplete the debt service reserve fund. The company has not provided Fitch with a detailed cash flow assessment for 2026 and has historically provided "incomplete or delayed financial information," the ratings agency said.

"This opacity heightens uncertainty around operating trends and funding plans, and increases the risk of adverse surprises, making transparency a significant driver of the rating," Fitch said.

Brightline has a $45 million revolver coming due in May that will need to be paid in full if the maturity is not extended by one year, Fitch said. Brightline "lacks the funds" to make the payment, analysts warned.

Fitch noted that the company has said it is "pursuing several action plans to enhance reserves available for funding operations and adding debt repayment protection, including additional debt borrowings and/or third-party equity funding."

In recent disclosure filings, Brightline has said it is seeking a "substantial" equity investment. Additional debt, would may be used for a planned expansion to Tampa, would require a ratings affirmation on existing bonds, which provides "some bondholder protection should the project pursue regearing for potential expansion in the future," Fitch said.