All Aboard Florida, a planned inter-city passenger train system that would connect downtown Miami to Orlando, could receive a crucial approval Wednesday to issue $1.75 billion in tax-exempt bonds in order to finance a 235-mile rail service.
AAF Holdings, a private subsidiary of the Coral Gables-based Florida East Coast Industries, is going before the board of a state agency in Orlando at 1 p.m. to seek permission to issue the private-activity bonds this year. The Florida Development Finance Corporation, or FDFC, issues industrial revenue bonds to private organizations.
The FDFC is being asked to facilitate a $2.5 billion project that backers say will remove up to 3 million cars from Florida’s roads and attract 14,000 riders a day by 2020. In South Florida, local leaders have looked to the project as a step toward addressing the region’s traffic woes.
All Aboard Florida received tentative approval from the U.S. Department of Transportation late last year to issue the bonds. But the company still needs the FDFC’s consent Wednesday and a final approval from Florida’s Division of Bond Finance. Under the proposed agreement, the FDFC would act as a conduit issuer, with All Aboard Florida assuming the debt, putting up close to $800 million in equity and compensating the agency for playing middleman.
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All Aboard President Michael Reininger said Tuesday that the company expects, with approvals, to “market the bonds as quickly as physically possible.”
“We are confident that the benefits that come as a result of our investment are squarely aligned with the objectives of the FDFC board to incentivize economic development in the state of Florida,” he said.
The company expects to run 32 intercity trains a day along the Florida East Coast railway tracks, starting in the second quarter of 2017 with operations in South Forida between Miami and West Palm Beach. The system would expand to Orlando by the end of that year.
Construction is already under way at MiamiCentral station, where All Aboard Florida is building next to the government center. And efforts are ongoing to secure enough public money to add infrastructure in the project so that Tri-Rail commuter trains can connect to the system and eventually run up the FEC tracks in the east part of the county as well.
Documents published by the FDFC show there is some risk for buyers of the bonds, including the potential that All Aboard could default on debt payments if projections don’t pan out. Jeff Larson, a consultant working for the FDFC, is recommending that the bonds, because they’ll likely be unrated and presumably higher risk, be sold in minimum $100,000 increments to “a limited group of either Accredited Investors or Qualified Institutional Buyers.”
A number of potential complications for the massive project, according to a draft bond purchase agreement, include lawsuits filed by two counties on the Treasure Coast and the reality that the 235-mile service is essentially a start-up.
“The Company currently has no revenues or cash flows and has never constructed or managed a passenger railroad,” states an offering memo published last week by the state. “There can be no guarantee that the Company will achieve profitability and generate positive operating cash flows in the future.”