The Florida rail operator's first-day win frees $190 million for its trains unit. A final hearing on the loan is set for Oct. 29.
Brightline cleared its first test in bankruptcy court.
Judge Mark Hall of the U.S. Bankruptcy Court for the District of New Jersey on Sept. 29 approved $258 million of debtor-in-possession financing on an interim basis. He overruled an objection from CK Opportunities Fund I, whose affiliates include Certares and Knighthead. The order frees $190 million, about 74% of the total, for Brightline Trains Florida LLC, the operating company.
Debtor-in-possession loans fund a company while it restructures in court. The final hearing on the loan is set for Oct. 29.
More creditors have joined the restructuring support agreement since the case began.
The plan
The plan leaves about $4.4 billion of municipal bonds in place, with interest deferred rather than the debt being written off. Assured Guaranty and bondholders including Nuveen and First Eagle are providing $490 million of exit financing, equal to about 11% of the bonds that remain.
The $258 million loan is a separate instrument from a $350 million contingent loan commitment Assured made earlier.
Two readings
One reading is that keeping the municipal bonds outstanding avoids a haircut and ties the largest bondholders into funding the exit. The creditors who would bear losses are the same ones putting in new money, which aligns their interests with the railroad's recovery.
The other reading is that deferred interest is not repayment. The bonds' eventual recovery depends on the railroad producing enough cash later, and the objection from the CK Opportunities group shows the plan does not yet have the support of every creditor class.
What to watch
The Oct. 29 hearing on final approval of the financing is the next step. Additional signatures to the support agreement, or a renewed objection, will show whether opposition is narrowing before a plan goes to a confirmation vote.