Fortress lines up rare project finance high-yield deal fro All Aboard Florida

Publish Date: 
Wednesday, June 18, 2014 - 6:30am

By Natalie Harrison and Mariana Santibanez,  Reuters - Source Article at UK Focus – Wed, Jun 4, 2014

NEW YORK (Frankfurt: HX6.F - news) , June 4 (IFR) - Investment management firm Fortress is looking to sell a payment-in-kind toggle bond that could let it stump up less equity to finance a new Florida passenger railway service.

The US$390m All Aboard Florida (AAF) deal is likely to offer more in the way of yield to compensate for both the riskier PIK toggle structure and the lack of cash flows until the project is up and running.

Fortress, which bought Florida East Coast Railway (FEC) in 2007, is looking to price the trade next week via left-lead JP Morgan (Other OTC: MGHL - news) and bookrunner Morgan Stanley (Berlin: DWD.BE - news) .

"If you say PIK, you often see half the market goes away, and then you say project finance and another half disappears," one source told IFR.

"[This trade] is a bet on Fortress," said the source. "There is security in this deal."

That includes a lien on the land, the rights to the passenger track and the ability to run the business if the project goes wrong.

In April, Florida East Coast Holdings Corp sold an upsized US$1.15bn issue comprised of a US$875m senior secured 2019 bond, which priced at par to yield 6.75%, and a US$275m senior 2020 note, which priced at the wide end of guidance at par to yield 9.75%.

Part of the proceeds were used to finance a dividend to the Fortress board, which will now put that towards the passenger line. FEC has not carried passengers since 1968.

ALL ABOARD FLORIDA

All Aboard Florida (AAF Holdings LLC & AAF Finance Company) announced a USD390m 5yr nc2 senior secured PIK toggle notes via JPM(left)/MS. Co-managers BMO. 144a/RegS for life. Pricing is expected next Friday (13Jun). First call at par plus 50% coupon. UOP: To finance all or a portion of the design, construction, development and equipping of the Project (Miami to Wes Palm Beach) and to fund pre-opening expenses and working capital BIZ: Privately owned and operated express passenger rail system in the U.S. Mandatory Redemption: At par if Company abandons Project before Opening Deadline. Offer to purchase: At par if Project fails to open by the Opening Deadline. Interest Payments: First payment will be 50% Cash / 50% PIK; may elect to pay 1) entirely in cash interest or 2) 50% cash / 50% PIK in subsequent periods; PIK interest will be equal to cash interest +75bps.