Primary Supply Rises to $9.4B; Brightline West Prices $2.5B Unrated Bond Deal Amid Federal Review of California High-Speed Rail Project

Reporting: Hoa P. Nguyen

The primary market is expecting an uptick in supply this week, with $9.4 billion compared with $6.3 billion the previous week, according to the new issue calendar on EMMA. The highlight of last week was the highly anticipated bond offering for Brightline West, which boosted total high-yield supply with $2.5 billion in unrated, green bonds. The deal, which was underwritten by Morgan Stanley, priced with two tranches due 2065 at a 9.5% coupon and yields ranging from 9.941% to 10.154%.

“The deal appeared to be well received by the market as investors look for yield and size in the municipal non-rated space,” said Mohammed Murad, head of municipal credit research and senior high-yield analyst at PT Asset Management. “The experience with Brightline Florida in terms of construction, ridership ramp-up, and recapitalization of the project will likely serve as a blueprint of best practices to draw from for the Los Angeles-Vegas high speed passenger rail project,” Murad added.

The Brightline West Project, while more expensive compared with Brightline Florida, is less complex in capital structure and construction route, market sources say. But as with any large-scale infrastructure project, market participants will continue keeping a close eye on construction progress, rolling-stock delivery, and ridership numbers to assess potential risks to cash flow generation, Murad cautioned.

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