Bright­line Cuts Deals In Law­suit

The Bond Buyer - - Front Page - By shely Sigo

a name change to Vir­gin Trains in the off­ing, and an IPO, the pri­vate own­ers of the All Aboard Florida/Bright­line pas­sen­ger train project ne­go­ti­ated set­tle­ments with two of four plain­tiffs chal­leng­ing its pri­vate ac­tiv­ity bond al­lo­ca­tion in fed­eral court.

Mar­tin County, Florida, and the non­profit group Cit­i­zens Against Rail Ex­pan­sion in Florida ap­proved agree­ments with the train’s pri­vate own­ers and pulled out of the lit­i­ga­tion on the eve of a piv­otal hear­ing Tues­day.

The deal helps AAF Hold­ings LLC, op­er­at­ing as Bright­line LLC, clear a le­gal ob­sta­cle to­ward meet­ing a Dec. 31 dead­line im­posed by the U.S. De­part­ment of Trans­porta­tion to is­sue $1.15 bil­lion of pri­vate ac­tiv­ity bonds to fi­nance por­tions of the sec­ond phase of its project from West Palm Beach to Or­lando.

Bright­line re­port­edly plans to is­sue the bonds in De­cem­ber, although the com­pany would not com­ment for The Bond Buyer Tues­day about its fi­nanc­ing sched­ule.

The fed­eral law­suit and pend­ing bond is­sue re­main on the radar as Bright­line pre­pares to re­brand it­self as Vir­gin Trains USA in an af­fil­i­a­tion with Bri­tish bil­lion­aire Richard Bran­son’s Vir­gin Group.

Bright­line an­nounced the stra With

te­gic part­ner­ship and trade­mark li­cens­ing agree­ment Nov. 16, the same day it closed the deal, with Vir­gin agree­ing to make an undis­closed mi­nor­ity in­vest­ment in the train project.

Fortress In­vest­ment Group LLC will re­tain ma­jor­ity own­er­ship of Bright­line, and its cur­rent man­age­ment team will re­main in place. The com­pany will tran­si­tion its con­sumer fac­ing brand to Vir­gin Trains USA dur­ing 2019.

Vir­gin Trains also filed a form S-1 reg­is­tra­tion state­ment Nov. 16 with the Se­cu­ri­ties and Ex­change Com­mis­sion an­nounc­ing its plan for an ini­tial pub­lic of­fer­ing of com­mon stock. The date of the IPO and amount of stock to be is­sued have not yet been dis­closed.

Mar­tin County and CARE filed a joint stip­u­la­tion of dis­missal with prej­u­dice Mon­day in the fed­eral law­suit, say­ing the set­tle­ment of their case against Bright­line pro­vided sig­nif­i­cant con­ces­sions, in­clud­ing safety and mar­itime ben­e­fits and cost sav­ings both had pur­sued dur­ing lit­i­ga­tion.

Bright­line also agreed to place a train sta­tion in Mar­tin or St. Lu­cie coun­ties – both in the Trea­sure Coast - within five years and pay half of the cost to build it, with lo­cal gov­ern­ment pay­ing the other half.

“Staff has worked dili­gently to ne­go­ti­ate a fa­vor­able out­come for Mar­tin County res­i­dents,” said County At­tor­ney Sarah Woods. “With this set­tle­ment, we’ve achieved our ul­ti­mate goal of in­creas­ing safety mea­sures along the rail cor­ri­dor while lim­it­ing fu­ture fi­nan­cial obli­ga­tions.”

In­dian River County and the In­dian River County Emer­gency Ser­vices District are still pur­su­ing the fed­eral suit. The County Com­mis­sion voted 4-1 on Nov. 20 to re­ject Bright­line’s pro­posed set­tle­ment.

“Over the past year we’ve been fo­cused on de­vel­op­ing a more con­struc­tive and co­op­er­a­tive re­la­tion­ship with the Trea­sure Coast in hopes of bring­ing all par­ties to­gether,” Bright­line said in a state­ment. “We ap­pre­ci­ate the work of Mar­tin County and CARE to bring this to a res­o­lu­tion and while dis­ap­pointed in this vote [by In­dian River County], our project will con­tinue mov­ing for­ward.”

U.S. District Court Judge Christo­pher Cooper heard oral ar­gu­ments Tues­day on mo­tions for summary judg­ment filed by In­dian River County, AAF Hold­ings, and the USDOT. Cooper could take months to is­sue a rul­ing.

Mar­tin County, In­dian River County, CARE and the In­dian River County Emer­gency Ser­vices District filed suit against the USDOT on Feb. 13 in the U.S. District Court for the District of Columbia.

The joint suit chal­lenged the fed­eral trans­porta­tion agency’s al­lo­ca­tion of PABs for Bright­line’s sec­ond phase, and con­tended that safety and en­vi­ron­men­tal laws were not prop­erly fol­lowed.

Bright­line’s law­suit set­tle­ment of­fer to In­dian River County would have pro­vided the in­stal­la­tion of safety mech­a­nisms above those re­quired by the fed­eral gov­ern­ment, such as more than 30 miles of fenc­ing on ei­ther side of the tracks. The of­fer would have saved the county between $2.5 mil­lion and $8.2 mil­lion, although the county would even­tu­ally in­cur some ad­di­tional main­te­nance costs.

In­dian River County Com­mis­sion­ers cited a num­ber of prob­lems with the of­fer, in­clud­ing pro­vi­sions that would have pre­vented the county from op­pos­ing, legally chal­leng­ing and lob­by­ing — or en­cour­ag­ing oth­ers to do the same — on any fed­eral, state or lo­cal ap­proval, per­mit, au­tho­riza­tion, reg­u­la­tion or fi­nanc­ing plan af­fect­ing the Bright­line project dur­ing con­struc­tion of the West Palm Beach-to-Or­lando seg­ment, and for the first five years af­ter rev­enue op­er­a­tions be­gin. Work on the route has not started.

In­dian River Com­mis­sion Chair­man Bob So­lari said the re­stric­tive pro­vi­sions in the set­tle­ment agree­ment “to­tally takes us out of the fight, which is un­ten­able,” be­cause they would pre­vent the county from tak­ing ac­tion if un­fore­seen prob­lems with the high­speed train arose while the re­stric­tions were in force.

The pas­sen­ger trains will travel through In­dian River County at speeds up to 110 mph on an ex­ist­ing rail­way shared with freight trains that cur­rently op­er­ate at speeds up to 60 mph. There are about 30 at-grade rail­road cross­ings in the county.

“This is an ex­is­ten­tial is­sue for In­dian River County,” So­lari said, re­fer­ring to years of ef­forts by the county try­ing to block the train. “To me this is a moral obli­ga­tion and we had it since we took of­fice to sup­port the health, safety and wel­fare of the peo­ple of In­dian River County.”

Dur­ing a pub­lic hear­ing Nov. 20, a num­ber of speak­ers en­cour­aged In­dian River County Com­mis­sion­ers to pur­sue the lit­i­ga­tion rather than set­tle.

“This law­suit has tremen­dous merit,” said In­dian River Shores re­tiree Pe­ter Seed, who pref­aced his re­marks by say­ing he was a pub­lic fi­nance at­tor­ney for over 30 years. “I think you have an ex­cel­lent chance of pre­vail­ing ul­ti­mately.”

Seed, who worked at the law firm of Briggs and Mor­gan Pro­fes­sional As­so­ci­a­tion at its St. Paul, Min­nesota, of­fice, said he re­tired at the end of 1998 and moved to In­dian River Shores.

He de­clined to be in­ter­viewed by The Bond Buyer about the spe­cific rea­sons he be­lieves the lit­i­ga­tion may be suc­cess­ful be­cause he said the law­suit is at a “highly sen­si­tive stage” with mo­tions for summary judg­ment un­der con­sid­er­a­tion.

Af­ter re­ject­ing the set­tle­ment of­fer, county com­mis­sion­ers voted to al­lo­cate an­other $1 mil­lion “to the ef­forts to ad­dress and pre­vent this train from go­ing through our county,” ac­cord­ing to the fund­ing mo­tion by Com­mis­sioner Joseph E. Flescher. The county has spent about $3 mil­lion so far.

Mar­tin County and CARE signed set­tle­ment agree­ments with the same re­stric­tive pro­vi­sions al­low­ing the train project to pro­ceed with­out their in­ter­fer­ence dur­ing con­struc­tion and five years af­ter start-up.

Bright­line, and now through its part­ner­ship with Vir­gin Trains, shows no sign of slow­ing down de­vel­op­ing the na­tion’s first pri­vately owned in­ter­city pas­sen­ger train sys­tem in more than a cen­tury.

The prospec­tus filed by Vir­gin Trains out­lines plans for fu­ture ex­pan­sion and train sta­tions, in­clud­ing a pos­si­ble stop at Walt Dis­ney World, though that is not far from the planned ter­mi­nus at Or­lando In­ter­na­tional Air­port. The map of the project’s route doesn’t show a sta­tion in the Trea­sure Coast.

The prospec­tus cov­ers a se­ries of gen­eral le­gal events that could im­pact the project, but doesn’t men­tion the pend­ing fed­eral law­suit.

In De­cem­ber 2017, the Florida De­vel­op­ment Fi­nance Corp. is­sued $600 mil­lion of PABs on be­half of AAF to fi­nance the first phase of its ser­vice from Mi­ami to West Palm Beach, which has been in full op­er­a­tion since May 19. The FDFC has also agreed to be the con­duit is­suer for the up­com­ing sale of $1.15 bil­lion for phase 2.

AAF has also ap­plied for a low in­ter­est Rail­road Re­ha­bil­i­ta­tion and Im­prove­ment Fi­nanc­ing loan through the Fed­eral Rail­road Ad­min­is­tra­tion to fi­nance phase 2, but has de­clined to say whether it will use the loan pro­gram or PABs, or both.

Ear­lier this year, the com­pany sub­mit­ted the only pro­posal to lease rights of way owned by FDOT and the Cen­tral Florida Ex­press­way Au­thor­ity to ex­pand pas­sen­ger rail ser­vice from Or­lando to Tampa. FDOT said it ex­pected to make a de­ci­sion on the pro­posal Wed­nes­day.

The com­pany also plans to of­fer pas­sen­ger rail ser­vice between Las Ve­gas, Ne­vada, and South­ern Cal­i­for­nia af­ter buy­ing a com­pany that was de­vel­op­ing those plans. ◽

Bloomberg News

Bil­lion­aire Richard Bran­son’s Vir­gin Group has taken a mi­nor­ity stake in All Aboard Florida’s Bright­line pas­sen­ger train project.

Newspapers in English

Newspapers from USA

© PressReader. All rights reserved.