Seventeen parent companies of Brightline Florida filed for Chapter 11 bankruptcy on Sept. 24 in U.S. Bankruptcy Court for the District of New Jersey. The companies carry about $2.5 billion in holding-company debt, according to court filings. The company that owns and operates the Miami-to-Orlando rail service—Brightline Trains Florida—did not file, and Brightline says train operations will continue as normal.

The prearranged filing comes at a time where Brightline has experienced year-to-date ridership and revenue up 14% through August. Brightline entered into a restructuring support agreement (RSA) with its bond insurer, Assured Guaranty, and a group of mutual fund bondholders, to carry out the restructuring, under which they committed to provide $490 million in new long-term financing. The company says in a press release the RSA will significantly deleverage Brightline’s balance sheet and greatly improve liquidity. The filings do not yet detail how each class of debt will be treated.

About $4.4 billion in bonds issued for Brightline's operating company and the affiliates holding its commuter and Tampa rights are set to remain in place during the restructuring and feature no reduction in principal, according to Brightline.

“Brightline is a critical part of Florida’s transportation network that has changed the way people move around the state. [This] agreement brings $490 million in new long-term capital to Brightline from the stakeholders who know this business, and it comes at a time of real momentum,” said Brightline Florida CEO Patrick Goddard. “This transaction will be a catalyst for further growth in ridership and revenue. We are grateful to our creditors, advisors, vendors, teammates and guests for their confidence throughout this process, and we look forward to the bright future ahead.”

Brightline's parent companies, operating company and affiliates carry about $7.1 billion in funded debt, according to a sworn declaration filed by Goddard. About $2.5 billion of that sits with the 17 companies that filed for bankruptcy—the rest is owed by the operating company and the affiliates holding Brightline's commuter and Tampa rights, none of which filed.

The companies require a restructuring because ridership and fares fell short of the projections Brightline borrowed against, according to the declaration. Goddard cited several factors:

• The suspension of service from March 2020 to November 2021 during the COVID-19 pandemic.
• Slower-than-expected growth in third-party booking channels.
• Marketing cuts in 2025.
• Delays from litigation.

Brightline sought new investors in two rounds, contacting 32 parties in the first and 64 in the second, which also sought buyers for company assets, according to the declaration. Neither produced a deal.

Not part of the agreement are noteholders of Brightline East's $1.12 billion in 11% senior secured notes represented by Davis Polk & Wardwell, the largest single debt owed by the companies that filed. When Brightline expanded its short-term bridge financing in June without those noteholders' consent, it defaulted on the notes, according to the declaration. Brightline said in the filing it will continue working to build consensus with additional stakeholders.

“This is a financial restructuring that is not expected to impact operations. It will give Brightline the balance sheet to match the growth we’re already seeing across the business. Brightline continues to grow and the business is strong,” said Brightline Train Development LLC CEO Nicolas Petrovic.

Brightline asked the court for permission to continue paying wages and benefits, a standard request in Chapter 11 cases, as part of the filing as Brightline's roughly 520 employees are employed by Brightline Management LLC, one of the debtors, rather than by the operating company.

Federal agencies have pledged funding to multiple Brightline projects, including a $57.5 million award to the city of Cocoa, Fla., for a new station Brightline would run, and a $78.9 million grant to the city of Stuart, Fla., to replace the St. Lucie River rail bridge , a project estimated at $262 million. Brightline said in its court filing that it has committed $26.2 million toward the project's local match.

Brightline's rights to extend service to Tampa and to develop commuter rail in South Florida are held by affiliates outside the bankruptcy. However, both sets of rights are pledged as collateral for bonds that have gone months without interest payments.

Brightline West, the separate high-speed rail project planned between Las Vegas and Southern California, is not part of the filing, though one of the debtors holds a roughly 40% stake in it.

A first-day hearing is scheduled for Sept. 29 in bankruptcy court. Brightline is set to ask for interim approval of its bankruptcy financing and permission to continue paying employees. A final financing hearing will follow. Brightline has requested its full financial schedules be due Nov. 9, and the $490 million in new long-term financing is to be funded when it emerges from bankruptcy.