MIAMI — Virgin Trains USA found strong demand for the bonds to finance it expansion, selling $1.75 billion in private activity bonds this week.
Trade publication The Bond Buyer reported that the offering may have received up to $4 billion in orders for the bonds. It quoted Brian Wynne, head of public finance at Morgan Stanley, as saying “The feedback that we received was, ‘Wow, this is a whole new level of train transportation.’”
The money will help fund Virgin Trains’ expand from its current West Palm Beach-Miami service to Orlando and, eventually, Tampa.
“We received an overwhelming positive response from qualified investors who recognize our early success and the long-term potential for our business,” the company said in a statement quoted by the Palm Beach Post. “This financing provides Virgin Trains the necessary funds to start construction into Orlando, creating additional economic benefits for Florida.”
The sale comes just ahead of an event today in Miami to begin the rebranding of Brightline as Virgin Trains, with Virgin Group founder Richard Branson among those in attendance, and a Friday meeting in Orlando to request approval for an additional $950 million in private activity bonds. [See “Big week ahead for Virgin Trains USA’s Brightline,” Trains News Wire, April 1, 2019.] Trains News Wire will be attending the Miami event.
Steve Foster, During the time that Amtrak ran the Sunset Limited from either Miami or Orlando, there were always passengers going to NOLA. One thing Amtrak forgets is that when the Silver Routes are shut down due to storms, there is no other route out of Florida. With the Sunset Limited, when the routes North of Jacksonville was shutdown, passengers could go West and then ride the Crescent North to DC or Chicago on the Cardinal. Or even straight up the Mississippi River to St Louis or Chicago. Lost of that route also prevents easy access to Atlanta.
Location, location, location. Riding NYC subways through formerly decrepit neighborhoods in every borough one is struck by the new housing rising near the stops.
New Orleans to Jacksonville is probably never going to occur again. No way the rail can compete with both air service and the bus service on I-10.
When I spent a few months in Tallahassee prior to Amtrak, the last one a day passenger trains in each direction that I saw were one baggage, one coach, one Pullman, and a dinner. The few times I saw one up close the coach never appeared more than half full.
As for the lawsuits, Indian River County is the last government body still pursuing legal action. You know things have changed because the local press in the Treasure Coast don’t have 1 iota of information on the Virgin Trains bond sale. Nothing. Nada. But the Miami, Ft Lauderdale and Orlando press had it as front page news. Fascinating when an area so captivated with its progress (and its attempts to stop it) has suddenly lost all interest.
The last article in the TCPalm was wholly negative saying the bond sale should never happen:
“Recently, others have come forward who are skeptical of this train proposal. As reported in the Palm Beach Post, “Despite growth in ridership, Brightline’s revenue from fares remains below projections.” As explained in the article, “with a cash flow of negative $6.8 million per month, the money-losing parent of the Brightline train service must look outside passenger revenue for a financial lifeline, said Ozgur Ince, a finance professor at the University of South Carolina.”
All I can say is “no kidding”. It was always a real estate deal. And most deals of these types are long term. I can easily say that when the Orlando link is open, the cash flow will begin to shift to the positive.
Orlando Sentinel Editorial Board thinks its great, but bluntly stated “let the trains run, but keep the taxpayers out of it”
it continued:
“So if a company wants to build a rail line using money that investors freely provided by purchasing bonds, we say more power to them.
Here’s what we also say: These investors know what they’re getting into. If this enterprise goes belly up, the state should not step in to bail them out.”
Here, here and how true. They (Virgin) have a lot to prove, here is to watching them go all out to try and make it happen.
Thanks for the report; good news. How about an update on what lawsuits still remain that will hinder actual construction to Orlando. Seems the flow of lawsuits are endless, thanks to St. Lucie, Indian River and Martin counties. I was told by a Bombardier employee on SunRail, money is already allocated for phase three, entrance into MCO. When will phase 3 begin? As a Central Floridian, what a pleasure to take SunRail to MCO and Virgin to South Florida. As Mr Kortum pointed out, travel on the 95 is at best, problematic. Always an accident somewhere between Central and South Florida.
Steve and John, Both of you are probably correct about the Jacksonville-New Orleans improbability of Virgin Trains service ever becoming a reality as the population density is not really there for this kind of service to be economically feasible. If it were to be possible,however,maybe a couple of corridor trains between New Orleans and Mobile which would also serve Gulfport/Biloxi and a couple between Jacksonville and Tallahassee with one daily train in each direction tying it all together from endpoint to endpoint. I realize this does not really fit the Brightline/Virgin model,but you can never say never. In any event,I wish them all the success in the world in their daring and exciting new ventures.
Riding south out of WPB one cannot help but notice the growing number of construction cranes reshaping the skylines around the stations. That number grows the further you go south. A landlord makes no money of a high-rise’s elevator but won’t lease anything above the third floor without it. That is what Brightline/Virgin is becoming: A horizontal elevator connecting the properties. And for a new service the number of people taking to it so soon is impressive. As someone on yesterday’s train expressed, “I’ll never drive I-95 again.”
As a resident of Florida I am so excited for this expansion. Traffic in Florida is horrible. I only hope there will be future plans for extensions to Jacksonville and from Orlando northwest through the Villages area, Ocala and on to Gainesville
Transportation infrastructure investment always raises land value. That was Brightline’s model. Maybe Virgin is playing the same game?
‘Wow, this is a whole new level of train transportation.’
Never underestimate the power of BS.
Anything + BS => More value + more power for the BS’ers.
Re: Any hindsight on how the bonds will be repaid
Cha-ching!
Having Branson branding and Softbank behind the scenes is what busted this through.
As noted before, people who look strictly at the passenger economics are looking at the wrong things. This is a major real estate play. The trains are just the inducement.
While Brightline had stated that their biz model would not cross state lines, the Barstow to Vegas play since Virgin came along seems to have changed that.
As for anything in Florida beyond Orlando and Tampa, don’t count on it. Jacksonville maybe if they can get their local transit situation sorted out perhaps, but that will be about it. There is no worthy real estate to develop with density that would support any service between Jax and New Orleans.
No one is going to fly to Tallahassee just to take a train. No one is going to live in Tallahassee, just to take a train.
Maybe Virgin can eventually fill in the gap between Jacksonville,Tallahassee,Mobile,Biloxi/Gulfport and New Orleans that Amtrak seems inept to accomplish. I sure hope that they prove the naysayers wrong and show them that there is a market for a well run private passenger train operation in the United States of America.
I wish Virgin Trains USA the best of success! My most sincere hope is this will be the start of a national trend towards privately operated passenger trains, thereby returning variety and glamour to railway travel.
I like that score, Al!
Go Virgin Trains USA! Can’t wait for the extension of service to Orlando and Tampa! No more having to drive to MCO for out-of-state travel! I sure hope we get a station here on the Space Coast! Also looking forward to not having to drive all the way to West Palm to catch the train to MiamiCentral.
Any hindsight on how the bonds will be repaid, considering Brightline reportedly operates with an abysmal cost recovery ratio that is inferior to even Tri-Rail?
Virgin 1, NIMBYS 0!
I think Gerald has it right in the two magic words, real estate.
Now where else could it play out? Expanding urban areas/regions up & down east and west coasts with unused or underutilized rail corridors. Being a Cali Bay Area resident, my two choices
First is a no brainer. Facebook is quietly behind a push to reopen the Dumbarton rail line corridor while the commuters cry for another bay crossing, any kind of bay crossing. The fact is that another south bay crossing already exists in an unused rail line that goes past Facebook HQ. The real estate play is in the East Bay area of Fremont & Newark while the go to places is Facebook HQ and downtown San Fran. What it will take? probably state legislation to fastrack environmental reviews, limit litigation and give Virgin direct access to and from Caltrain San Fran Fourth street station access. California could one up things and use some of its budget surplus to build the rail connection into Transbay center/Salesforce tower in same legislation. You would have a second private transit option in Virgin In addition to catching BART in Fremont to get to your job in Salesforce tower,
Second is a big push. Virgin, Google & folks behind Texas Central team up on a dedicate High speed rail route from downtown San Jose to Central Valley. Big bucks on right of way and tunneling but also huge real estate returns from Silicon Valley all the way into the Central Valley. The quickest way again, state action for Caltran to fastrack and secure real estate & lease back to private rail operator in Virgin. Now that would be big time with big names and big bank accounts
Of course, this will take California politicians, specifically Democrats, with some gumption to actually want to embrace private equity & operators and step on the toes of those who want to spend millions studying and or those lawyers who lined their pockets opposing stuff like the actual use of an existing bridge. Not holding my breath.
How to repay the bonds, two words…real estate, real estate, real estate.
Nice yield,
Some $250 million priced with a 6.25% coupon and a put in 2024; $500 million priced with a 6.375% coupon and a put in 2026; and $1 billion priced with a 6.50% coupon and a put in 2029.
Some collateral:
The bonds are secured by a first priority lien on assets that include revenues, passenger rail easements, stations, rolling stock, leasehold interests, reserve funds and a pledge of the equity interest of the borrower.
Losses so far:
Total revenues were $9.9 million last year; operational, corporate and administrative expenses were $112.7 million; and a net loss of $117.4 million was reported. Accounts payable and accrued expenses as of Dec. 31 totaled $133.3 million.
Risk/Rewrd ratio about right in my view.
I think it makes a good start and that it succeeds.
This is great news, I hope this new operation will be a good example for a lot of other places in our country.