AAF: Second Phase Of Miami-Orlando Rail Line Could Also Be Privately Financed

[thelakelander]

All Aboard Florida is considering a return to the private bond market for a second time, after completing a bond sale successfuly earlier this year.

In June, the company successfully sold $405 million in bonds in a deal that 'wowed' the bond markets. Those funds were only intended to cover construction of the first phase between Miami and West Palm Beach, which is already underway.

Instead of using a Railroad Rehabilitation & Improvement Financing loan from the Federal Railroad Administration for the second phase, the company now says that they determined to pursue Private Activity Bonds, which are tax-free and privately financed. Since they are sold to private investors, the company says that taxpayers won't be taking on any risk of a default. The PABs would either replace or reduce a potential RRIF loan, which was originally expected to be $1.6 billion.

Despite the change in financing, opposition groups north of Palm Beach are continuing to fight the project over traffic, safety and noise concerns that they say would disrupt their way of life way while bringing no benefits.

Full article: http://www.exmiami.org/index.php/second-phase-of-miami-orlando-rail-line-could-also-be-privately-financed/

[spuwho]

Yes, AAF has said from Day One that if the RRIF Loan is either not approved or is delayed, they will seek other financial tools to meet their needs.

Many in the AAF opposition have been mocking AAF for their need to use PIK bonds at 12% to get the project kicked off, but AAF always knew that the PIK bonds were going to be refinanced.

The RRIF loan is still the best deal technically for AAF since it offers the best rates, is syndicated through a set of banks and was specifically designed for the very thing they are doing, build rail infrastructure.

The last RRIF loan that didn't see the light was the attempt by the DM&E (Dakota Minnesota & Eastern) for a $2 Billion loan to extend their line from Belle Fourche to the Powder River Coal Basin in Wyoming. 
Fortunately the loan never went through because the DM&E was revenue weak to begin with, the market for coal dropped big time as the shale gas boom allowed utilities to shift from coal to gas to create power. DM&E eventually sold out to Canadian Pacific, who then turned right around and sold off the west end to Genesee & Wyoming (who run Talleyrand Railroad here in Jacksonville).

If the AAF opposition are successful at interfering or delaying the RRIF loan, their are other instruments at hand they can use. Private bonds, syndicated bonds underwritten by any host of entities. Sovereign wealth, Chinese entities, etc. all could provide financing terms at rates in a range higher than the RRIF.

If AAF elevates the talk of alternate financing, that is merely a positioning strategy to let the NIMBY's in the Treasure Coast know that if they or any politicos interfere with the RRIF, they can get financing in other places.

While I agree there are some civic issues that need to be looked at (crossing safety, ER access), I don't agree with the foundations of their arguments, as they are based on sometimes a little more than hysteria, a cynical view of the government (they are blaming Obama now), and lately people have been calling it a fantasy spend for "rail nerds".

I have attempted in many cases to engage TC folks in a rational discussion on the concerns in other online venues and I get blasted with accusations that I somehow am some kind of liberal nut job out to spend their tax dollars or as they put it "stealing their money". Being rational is not a high point here.

So rather than work with AAF in good faith, many of the towns along the way are playing Russian roulette and thinking that not cooperating will somehow delay the results. Hardly.

I am most positive it will all work out for AAF, but the amount of pushback the TC is making will hurt them in the long run.