The structure of the $1.75 billion of bonds connected to the All Aboard Florida rail project was disclosed in offering documents ahead of its Wall Street debut, which still is not set. The documents also refer to the parent company's real estate development plans around its train depots.
Although no price has yet been attached, the bonds will be high-yield, meaning they will be higher paying and carry a lower credit rating than investment-grade corporate bonds, Treasury bonds and municipal bonds.
The 30-year bonds will have a mandatory tender in 10 years, with proceeds used for construction, to set up a debt service reserve and to pay capitalized interest.
The Florida Development Finance Corp., which approved the bond offering documents on Aug. 5, will issue the debt on behalf of All Aboard Florida so the rail company can benefit from FDFC's tax-exempt status.
FDFC has done this for other businesses, said chief operating officer Louis Laubscher, "with the responsibility of repayment lying with the companies."
Bank of America Merrill Lynch will serve as lead underwriter, with JPMorgan, Morgan Stanley & Co., and Piper Jaffray also participating.
The preliminary offering document includes a common warning for debt offerings, that "investing in the bonds involves a high degree of risk." But in this case, there are quite a few reasons offered, including All Aboard Florida having "a substantial amount of indebtedness, which could adversely affect its ability to satisfy its" bond payment obligations and could impair the company's financial condition in the future.
In addition to carrying passengers through towns, All Aboard Florida's parent, Florida East Coast Industries, will put down some roots. "Because of the high number of passengers expected to travel through downtown stations, there are several attractive retail, residential and commercial transit-oriented real estate development opportunities at or near station sites," the offering book says. "The company expects that one or more of its affiliates will pursue these development opportunities."
All told, the project is expected to cost $2.5 billion. In addition to the $1.75 billion bond, anticipated is about $69 million in commuter rail financing and roughly $686 million in cash equity contributed by Florida East Coast Industries.
The new passenger rail service is expected to offer 16 daily departures from each of Miami and Orlando when fully operational and a total travel time of approximately three hours with train speeds of up to 125 miles per hour.
When service opens for the the 235-mile train line in 2017, revenue in the first year is estimated to be $51.2 million based on 753,700 passengers, according to the document. By 2025 the numbers are expected to jump to $482.5 million with over six million passengers.
The lowest fare the opening year will be $20.40 between Fort Lauderdale and West Palm Beach. The highest will be $158.39 between Miami and Orlando. The Miami to Orlando full-run goes to $168.08 in 2020.
All Aboard Florida estimates through 2021 it will add $3.5 billion to Florida's GDP through $2.4 billion in labor income and $653 million in federal, state and local government tax revenue. Some 10,000 jobs will be created per year through rail line construction and 2,000 jobs created post rail line construction, the document stated.
All Aboard Florida did not return a call for comment Wednesday.