Passenger Trains > Fortress cuts bond sale for Las Vegas train by $800M

Fortress Plans to Sell $2.4 Billion for Vegas Rail, Still Record

Bloomberg

by Romy Varghese
 October 20, 2020, 10:48 AM PDT  


Fortress Investment Group cut the size of its municipal bond sale for for a passenger railroad between California and Las Vegas by $800 million to $2.4 billion, seeking to draw enough buyers to finance the speculative project.


 The size of the offering of unrated securities was included in a preliminary pricing wire viewed by Bloomberg. While it’s less than the $3.2 billion the company had intended to sell, it would still be the largest ever offering of unrated municipal securities. They are expected to price this week.


 Yields range from 7% to 7.5% depending on the call dates, with final maturity in 2050, in line with earlier price guidance although the call features differ. That yield on a 30-year bond would be about four times what the highest rated state and local governments pay, data compiled by Bloomberg show.


 The update comes as Fortress’s Brightline Holdings LLC is offering to buy back as much as $250 million of bonds from investors sold for its Florida railroad. It will buy them for 100 cents on the dollar, about 17% more than where some of the securities have been trading, on the condition that its sale for the Las Vegas line occurs.


 Ben Porritt, a spokesperson for Brightline, declined to comment. Samantha Kreloff, a spokesperson for lead underwriter Morgan Stanley, didn’t immediately respond to a request for comment.


 Last week, Fortress updated terms to put more equity into the Las Vegas project and lengthened the period that a reserve account could be used for payments to bondholders. The increase in equity brings it to a total of $3 billion, representing 32% of the capital structure, up from the previous 28%, according to bond documents. The venture plans to use a total of $6.38 billion of debt for the $8.4 billion project.


 Brightline expects the rail to ultimately extend to Los Angeles. For now, the bond issue will cover a 169-mile (272-kilometer) line connecting Las Vegas to a southern California desert town called Apple Valley, 90 miles away from downtown Los Angeles. The first high-speed, fully electric rail in the U.S. will run in 2024, according to offering documents.

7% ?  Can you spell JUNK Bonds.  There's not a 10 foot pole long enough for me to touch those. Lol

john
 

SeaboardMan Wrote:
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> 7% ?  Can you spell JUNK Bonds.  There's not a
> 10 foot pole long enough for me to touch those.
> Lol
>
> john

I was thinking the same thing.  Will be interesting to see what the final pricing will bring,  and whether they can sell the entire issue.  They might have to further reduce the amount of bonds or lower the price (i.e. higher yield) which is not good when you're on the trading desk. The worst is when potential institutional buyers tell you 'nobody cares'  as you're trying to sell the bonds.  Been there, done that.

rantoul Wrote:
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> I know news reports describe the route as 'I-5'
> Las Vegas NV - Apple Valley CA, but has the route
> been defined to a specific location / right of
> way?

Yes. 

https://www.waterboards.ca.gov/lahontan/water_issues/programs/clean_water_act_401/docs/desertxpress/frarod/frarod_final.pdf

The "fully electric rail" part is interesting, too

Here we go again. The scam that never ends. Better odds at the crap tables :-)

SanDiegan Wrote:
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> Here we go again. The scam that never ends. Better
> odds at the crap tables :-)

Why is it a scam? These guys built the trains in Florida why won't they here?

Posted from Android

goduckies Wrote:
-------------------------------------------------------
> SanDiegan Wrote:
> --------------------------------------------------
> -----
> > Here we go again. The scam that never ends.
> Better
> > odds at the crap tables :-)
>
> Why is it a scam? These guys built the trains in
> Florida why won't they here?
>
> Posted from Android

Well for starters there aren't any mountain passes to build through in Florida. Cost of construction is much, much less.

PHall Wrote:
-------------------------------------------------------
> goduckies Wrote:
> --------------------------------------------------
> -----
> > SanDiegan Wrote:
> >
> --------------------------------------------------
>
> > -----
> > > Here we go again. The scam that never ends.
> > Better
> > > odds at the crap tables :-)
> >
> > Why is it a scam? These guys built the trains
> in
> > Florida why won't they here?
> >
> > Posted from Android
>
> Well for starters there aren't any mountain passes
> to build through in Florida. Cost of construction
> is much, much less.

I think the Swiss would split their sides laughing if they read that...

PHall Wrote:
-------------------------------------------------------
> goduckies Wrote:
> --------------------------------------------------
> -----
> > SanDiegan Wrote:
> >
> --------------------------------------------------
>
> > -----
> > > Here we go again. The scam that never ends.
> > Better
> > > odds at the crap tables :-)
> >
> > Why is it a scam? These guys built the trains
> in
> > Florida why won't they here?
> >
> > Posted from Android
>
> Well for starters there aren't any mountain passes
> to build through in Florida. Cost of construction
> is much, much less.

I don’t know. I’d take the mountains of Ca/NV boarder over the Nimbies of Florida any day of the week.

Posted from iPhone

howeld Wrote:
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> I don’t know. I’d take the mountains of Ca/NV
> boarder over the Nimbies of Florida any day of the
> week.

There was a discussion several months ago about Mountain Pass, pointed out by PHall. I don't know of any HSR ROW with 6% grade. Those with 3% grade have to run at lower speeds. All discussed in that thread, so unless people here just talk and don't read anything, I shouldn't have to repeat what was said.

East Coast NIMBYs might meet their match in West Coast Environmentalists, which will dictate the "viability" of construction along the CA/NV border, because following I-15 (4.3% to 6% grade) is probably a non-starter for the XpressWest proposal. So are you sure about your preference? :-)

cchan006 Wrote:
-------------------------------------------------------
> There was a discussion several months ago about
> Mountain Pass, pointed out by PHall. I don't know
> of any HSR ROW with 6% grade. Those with 3% grade
> have to run at lower speeds. All discussed in that
> thread, so unless people here just talk and don't
> read anything, I shouldn't have to repeat what was
> said.

The plan appears to be tunneling to keep the maximum grade to 4.5%.

3.5% seems to be the maximum grade for the French TGV lines.

Ray

Ray_Murphy Wrote:
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> 3.5% seems to be the maximum grade for the French
> TGV lines.
>
> Ray

I wonder if that is an average over a short distance? I seem to recall talk of short steep grades when TGV was first built.



Edited 1 time(s). Last edit at 10/23/20 16:20 by ts1457.

A 5 minute conversation with any of the many truck drivers who run between the LA Basin and Las Vegas would have told them that using the I-15 ROW was not a good idea.

PHall Wrote:
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> A 5 minute conversation with any of the many truck
> drivers who run between the LA Basin and Las Vegas
> would have told them that using the I-15 ROW was
> not a good idea.

You are imagining problems.  It does not seem to be bothering Fortress.



Edited 1 time(s). Last edit at 10/23/20 16:21 by ts1457.

SanDiegan Wrote:
-------------------------------------------------------
> Here we go again. The scam that never ends. Better
> odds at the crap tables :-)

I agree with that!

Posted from Android

ts1457 Wrote:
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> You are imagining problems.  It does not seem to
> be bothering Fortress.

Fortress bothers me. They are a hedge fund, not directly in construction or surveying. As pointed out elsewhere, just because they have money does not mean they are competent enough to do the job.

4.5% grade WITH tunnels is still not a good idea. I would have hoped the expense of tunneling would have reduced the grade to ~2%.

goduckies Wrote:
-------------------------------------------------------
> SanDiegan Wrote:
> --------------------------------------------------
> -----
> > Here we go again. The scam that never ends.
> Better
> > odds at the crap tables :-)
>
> Why is it a scam? These guys built the trains in
> Florida why won't they here?

If what they did in Florida really counted, then the bonds would be priced (or carry a yield) with less risk. That's just the financial angle, which SeaboardMan and masterphots articulated pretty well.

ts1457 Wrote:
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> The plan appears to be tunneling to keep the
> maximum grade to 4.5%.

The original plans, which of course could have easily changed now, had two possible alignments between Mountain Pass and Primm.  The southern alignment follows I-15 but not in the median as its too steep.  Its bows south keeping the grade at 4.4% and 4.5%.  Interesting enough, while this alignment has no tunnels at all, its does have significant cuts on the western part of the descent and a long aerial structure on the eastern part.

The northern alignment, while a little longer, has more gentle grades.  But it includes a couple tunnels and would loop around the northern side of the solar facilities now built near Primm.