The Real Deal Miami

Bond issue for All Aboard Florida still pending

Underwriters are still lining up investors for the $1.75 billion tax-free bond offering.

October 11, 2015 12:00PM

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State officials approved bond issue for All Aboard Florida August 5.

State approved bond issue for All Aboard Florida August 5.

Fortress Investment Group, the company behind a planned passenger rail service from Miami to Orlando, is still seeking investors for a $1.75 billion tax-free bond issue that Florida officials approved two months ago.

Bank of America Merrill Lynch is leading underwriters who are trying to line up investors for the Florida bond offering to help finance the startup of the All Aboard passenger rail service, expected to begin in 2017.

But the underwriters have not yet set a date for the tax-free bond offering. The Florida Development Finance Commission approved the offering on August 5. The bonds are expected to pay a relatively low interest rate because the interest income is exempt from federal income tax.

New York-based Fortress Investment Group, a private-equity and hedge-fund company, faces skepticism among some bond investors who doubt that enough travelers would use the All Aboard Florida rail service to make it profitable. Fortress is the controlling shareholder of Coral Gables-based Florida East Coast Industries, which is developing the All Aboard Florida service.

Money manager Lyle Fitterer told the Wall Street Journal that he considered but passed on the bond offering.

“We looked at it, but we are not going to be participating,” said Fitter, managing director for Wells Capital Management, which has municipal securities valued at $38 billion. “It came down to a credit decision.”

Jim Colby of Van Eck Global in New York, who manages  high-yield municipal securities valued at about $1.6 billion, has reviewed and rejected the Florida bond issue to support All Aboard Florida.

“It was not priced to demand,” Colby told the Wall Street Journal. “That is about all I will say.”

Representatives of Fortress Group, All Aboard Florida and Bank of America all declined to comment.

Daniel Solender of Lord Abbett & Company in Jersey City, New Jersey, said he hadn’t decided whether to invest in the All Aboard Florida bond issue.

He also told the Wall Street Journal that the passenger rail company may raise more capital from equity investors to reduce the concerns of potential investors in the bond issue. [Chicago Tribune] — Mike Seemuth