All Aboard Florida is trying to secure a $405 million loan that carries a hefty 12 percent interest rate, according to a report from Bloomberg News. The interest on a typical high-yield bond is between 5.5 percent to 6 percent.
The loan, in the form of medium-term note, is separate from the $1.5 billion in financing that the passenger rail project has requested from the Federal Railroad Administration, according to the Palm Beach Post.
Chris Kotowski, a Wall Street analyst familiar with All Aboard Florida and Fortress Investment Group, which bought Florida East Coast Industries in 2007, told the Post that a 12 percent yield is “quite high” but not necessarily unusual.
“There is risk here because no one has built one of these things for a long time,” said Kotowski, an analyst at Oppenheimer & Co. in New York. “So it makes sense the investors would want to be compensated for that risk.”
All Aboard Florida refused to comment on the bonds.
“All Aboard Florida is a private company and does not need to discuss its financing structure,” it said in a statement. [PBP] – Christopher Cameron