KBRA Downgrades Ratings for Brightline East LLC’s $1.33 Billion Senior Secured Notes to B+ From BB; Outlook Negative

KBRA downgrades to B+ from BB its ratings for Brightline East LLC’s $1.33 billion senior secured notes. The Outlook is Negative.

Brightline East is the indirect owner of Brightline Trains Florida LLC (Brightline Florida), the owner and operator of a 235-mile intercity high-speed passenger rail connecting Southeast and Central Florida. The rating downgrade and Negative Outlook respond to Brightline’s underperformance during 2024 compared to KBRA’s rating case, coupled with our expectation of further liquidity constraints during the ramp-up phase.

Key Credit Considerations

(-) Updated Ridership Scenario

A slower ramp-up than expected, mainly caused by capacity constraints in short-distance ridership since the long-distance segment reached commercial operations, resulted in lower-than-expected short-distance ridership, albeit somewhat offset by higher-than-expected long-distance ridership for 2024. Lower-than-forecast ancillary services, coupled with higher-than-expected operating expenses, led to an operating cash flow shortfall at the OpCo level that was covered with its liquidity reserves. KBRA updated its ridership forecast to account for the capacity constraints in the short term and now includes a slower ramp-up. Based on these updates, KBRA does not expect any distributions from OpCo to flow down to Brightline East until 2027.

(-) Limited Liquidity

As of March 31, 2025, Brightline East has $230.4 million in liquidity reserves, including the $30.8 million debt service reserve account (DSRA). Under KBRA’s updated assumptions, and given that no distributions from OpCo are expected before 2027, the liquidity currently available will be sufficient to cover debt service through July 1, 2026, exposing the transaction to a potential default as early as January 1, 2027, should ridership and revenues not exceed KBRA’s forecast, or if higher operating expenses continue through the ramp-up phase.

Surveillance Rating Rationale

2024’s capacity constraints—which are expected to persist through most of 2025, albeit to a lesser extent—have increased uncertainty in short-distance ridership performance. Despite certain initial signs of recovery and ridership tolerance to fare increases, KBRA’s long-term expectations for ridership and passenger fares will be shaped by project performance during 2025 and the company’s ability to complete capacity expansion plans on time. The downgrade reflects the increased liquidity risk at Brightline East under KBRA’s updated rating case, in which distributions to Brightline East are not expected until 2027. The available liquidity is expected to cover debt service obligations through July 1, 2026, but Brightline East could become insolvent afterwards. Refinancing risk is somewhat limited, assuming an asset useful life of 40 years, resulting in a discounted cash flow-to-debt ratio of 4.93x as of January 1, 2027. If ramp-up rates are lower than expected under our updated forecast, the project’s cash flow profile could be severely impacted, limiting Brightline East’s resiliency in downside scenarios.

Outlook

The Negative Outlook reflects KBRA’s updated ridership forecast, under which distributions to Brightline East are not expected until 2027, at which point the transaction may face high solvency risk. A rating upgrade is unlikely due to the slower-than-expected ramp-up, as well as the notes’ structural subordination to any existing and future debt issued by Brightline Florida. Another downgrade over the next 18 months is possible if performance during 2025 fails to exceed KBRA’s current expectations.

Rating Sensitivities

An upgrade is unlikely given the structural subordination of the notes to all debt issued at the Brightline Florida level.

We could lower the ratings if there were lower-than-expected ridership and/or revenues, a slower or more prolonged ramp-up period, or higher operating costs than forecast in KBRA’s rating case that expose Brightline to high liquidity and solvency risk.

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.

Social Factors

Increasing 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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