By Martin Z. Braun, Bloomberg
The Fortress Investment Group-backed company that’s building a high-speed passenger railroad between Southern California and Las Vegas plans to raise cash through borrowing and the sale of equity as construction costs increase.
The company, called Brightline West, also plans to refinance $2.5 billion of debt issued in March as soon as next month, Chief Executive Officer Mike Reininger said in an interview Thursday, after earlier reporting the plans on a conference call with investors.
Reininger didn’t provide a new cost estimate for the 218-mile (351 kilometer) railroad, which was previously estimated at $16 billion. But he said it has increased due to rising labor and material costs, due in part by high demand caused by the proliferation of data centers, power plants and transportation projects.
“It will probably not be a surprise to anyone, that we are experiencing a construction market right now that is seeing increasing costs,” Reininger said on the call. “We are definitely not alone in this situation.”
Once completed, Brightline West will run trains at speeds as fast as 220 miles per hour (354 km/h), making the trip from Rancho Cucamonga, a suburb outside of Los Angeles, to Las Vegas in about two hours.
The plan to raise more cash comes as the company’s already-running passenger train from Miami to Orlando is seeking additional financing to cut its debt and bolster reserves. Ridership and revenue on the Florida line, which has $5.5 billion of outstanding debt, has fallen below projections, and it pushed off an interest payment to give it time to bolster its finances.
Without an equity infusion, Brightline’s Florida line, which has a quarterly operating deficit of around $20 million, could run out of cash as soon as this quarter, according to Fitch Ratings.
Brightline West could provide more details about its financing plan in October. But the broad contours currently include securing additional equity above its previous $1 billion target and the sale of new bonds, in addition to the refinancing.
The equity infusion will result in a stronger balance sheet, Reininger said.
“The new plan that we are working on includes materially more equity,” Reininger said.
Brightline West, which has started construction on its Las Vegas station, has finalized four of nine separate construction contracts for the project and is concluding negotiations on the remaining ones. The company is also negotiating with a consortium of banks to provide a $6 billion loan.
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