KBRA Downgrades Ratings for Brightline Florida’s $2.2 Billion Revenue Bonds to BB From BBB
5 Aug 2025 | New York
KBRA downgrades to BB from BBB its ratings for Florida Development Finance Corporation’s (FDFC) aggregate $2.2 billion revenue bonds (Brightline Florida LLC issue, series 2024, tax-exempt), associated with the Brightline Florida passenger rail project. A portion of the private activity bonds (PAB) ($1.13 billion) benefit from a financial guaranty policy issued by Assured Guaranty Inc., rated AA+/Stable by KBRA. The Outlook is Negative.
The downgrade reflects ongoing underperformance in ridership relative to KBRA’s rating case, as short-distance demand during Q2 2025 continued to lag expectations despite the deployment of additional train cars and expanded capacity. Fare levels have also remained below projections made by both KBRA and the issuer, resulting in weaker-than-anticipated revenues during 1H 2025. This operating underperformance has led to continued draws on the project’s liquidity reserves, further weakening its financial position.
FDFC issued the PABs as a conduit issuer and lent the proceeds to Brightline Trains Florida LLC (Brightline Florida) as the borrower. Brightline Florida developed the 235-mile intercity high-speed passenger rail service connecting Southeast and Central Florida in two phases. Phase I, comprising a 67-mile segment from Miami to West Palm Beach, was completed in late 2017, with passenger service offered between Fort Lauderdale and West Palm Beach in January 2018, extending to Miami shortly after in May 2018. Phase II extended the system 168 miles from West Palm Beach to Orlando, commencing service in September 2023. The high-speed rail service spans Miami to Orlando, with main stations in Fort Lauderdale and West Palm Beach, as well as inline stations in Aventura and Boca Raton, both of which started revenue service in December 2022.
Key Credit Considerations
(-/+) Progress on Capacity Expansion, but Recovery Continues to Lag Expectations
As part of its fleet expansion strategy, Brightline successfully deployed six-car trainsets across its operations by June 2025, in line with its previously communicated schedule. The remaining 10 cars—required to complete the transition to seven-car trainsets—are expected to be delivered between September and November 2025. Once fully integrated, this will enable the company to restore its full-service schedule by year-end. However, overall ridership recovery has continued to lag expectations, particularly in the short-distance segment, where performance reflects a slower-than-anticipated rebound in commuter travel demand.
(-) Slower Recovery Outlook and Revised Forecast Assumptions
While Brightline has made progress in expanding capacity and restoring service, overall ridership recovery is now expected to be slower than previously anticipated. KBRA has revised its forecast to reflect the project’s recent performance trends and continued uncertainty surrounding the timing and strength of demand recovery—particularly in the short-distance segment. Under the updated rating case, total ridership is projected to grow at a compound annual growth rate (CAGR) of 3.8% from 2023 through 2054, while ticket revenues are expected to grow at a 5.4% CAGR over the 2024–2054 period. KBRA has also adjusted its fare escalation assumption to 2.0% annually (down from 2.5%), informed by historical pricing trends and limited visibility into long-term elasticity once the service returns to full schedule. These revisions result in an average debt service coverage ratio (DSCR) of 1.58x under the rating case.
(+/-) Liquidity Position Pressured by Ongoing Operating Shortfalls
Operating revenue shortfalls during 1H 2025 have resulted in continued draws on the ramp-up reserve account (RURA), while the prefunded interest reserve has now been fully utilized, in line with expectations. The next scheduled payment from operating revenues is due on January 1, 2026; however, under KBRA’s updated forecast, the project is not expected to generate sufficient cash flows to meet this obligation, necessitating further draws on the project's liquidity reserves. Under the rating case, the project’s available liquidity—including the DSRA—is expected to be sufficient to cover projected debt service shortfalls during ramp-up (2026-28). While KBRA does not currently anticipate a payment default within this horizon, sustained underperformance in ridership and revenues during the ramp-up period could materially weaken the project’s financial position and pressure future debt service coverage.
Surveillance Rating Rationale
The rating reflects continued underperformance in ridership and revenues relative to KBRA’s initial expectations, particularly in the short-distance segment. While Brightline successfully deployed six-car trainsets by June 2025 and is on track to reach seven-car configurations by year-end, the anticipated recovery in short-distance commuter demand has been slower than projected. Fare levels have also remained below expectations, contributing to weaker operating cash flows.
As a result, the project continues to rely on liquidity reserves. The RURA has experienced additional draws, and KBRA expects further draws on the RURA to meet future obligations, with the account projected to be fully depleted by year-end 2026. The DSRA may begin to be utilized as early as January 2026. While available liquidity is expected to cover forecast shortfalls through 2028, prolonged underperformance could materially pressure the project’s financial position.
KBRA understands that the company is currently exploring a range of options to enhance liquidity at the operating company level in order to strengthen the transaction’s financial position. While specific details are not yet available, potential avenues under consideration include a mix of additional debt across different levels of the capital structure and the introduction of new equity. KBRA will evaluate any such measures as more information becomes available, including their potential impact on the project’s credit profile.
Outlook
The Negative Outlook reflects (i) the continued capacity constraints expected to impact short-distance ridership through most of 2025, and (ii) Brightline’s reliance on its liquidity reserves to meet its debt service obligations under the senior PABs. A rating upgrade is unlikely during the ramp-up period, which is expected to go through 2028 under the KBRA rating case. Lower-than-expected ridership and/or revenues or higher-than-expected operating expenses over the next 12 months could lead to a rating downgrade if forecast DSCRs are below 1.45x.
Rating Sensitivities
Higher-than-expected ridership or lower operating costs resulting in sustainably higher cash flow available for debt service after the ramp-up phase could lead to an upgrade.
We could downgrade the rating if there were lower-than-expected ridership and/or revenues, a more prolonged ramp-up period, or higher operating costs than forecast in KBRA’s rating case that result in DSCRs below 1.45x.
ESG Considerations
Environmental Factors
Brightline Florida’s passenger rail service is estimated to represent a 75% reduction of CO2 emissions per passenger kilometer compared to car transportation. Therefore, the transaction could potentially benefit from future regulations to address carbon limits and promote public transportation. The company received the green bond designation in 2019.
Social Factors
Preferences for cleaner and more efficient modes of travel could benefit Brightline Florida’s ridership, especially if such preference changes are permanent. However, given the high exposure of the passenger rail industry to economic cycles, ridership could be impacted by economic downturns that result in rising unemployment and a reduction in disposable income.
Governance Factors
Brightline Florida’s management team comprises professionals with a wealth of experience in the transportation and hospitality industries. Further, the company’s construction management and operating teams come from diverse backgrounds with experience in some of the largest rail systems in the country, in addition to benefiting from Siemens engineers on site 24/7.
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