North America: Brightline West to raise equity and address debt for rail project
Company claims construction costs have increased due to labor and materials demand.
Key points:
– Brightline West plans to raise cash through additional equity sales, new bonds and refinancing $2.5bn of debt
– Costs for the California-to-Las Vegas rail line have risen, though no new overall estimate was provided
Brightline West, who is building a high-speed passenger rail line between Southern California and Las Vegas, confirmed it will pursue new financing measures as project costs continue to rise, according to Bloomberg.
The company said it will raise additional equity, issue new bonds and refinance $2.5bn in debt that was issued in March. In the view of the company, the updated financing plan includes securing materially more equity than the original $1bn target.
Brightline West has so far finalised four of nine construction contracts and begun work on its Las Vegas station. Negotiations are ongoing for the remaining contracts and for a $6bn loan with a consortium of banks.
If completed, the high-speed rail could increase visitor traffic to Las Vegas, potentially boosting casino revenues by making the city more accessible from Southern California.
When complete, the line is expected to operate trains at speeds of up to 220 miles per hour (354 km/h), reducing travel time from Rancho Cucamonga, California, to Las Vegas to about two hours.
Good to know: Further details on the financing strategy are expected in October
CEO Mike Reininger disclosed the plans during an investor call and in a subsequent interview. Reininger offered no new cost estimate for the railroad, which had previously been projected at $16bn.
According to Reininger, increases are linked to higher labor and materials costs, partly due to strong demand from data centers, power plants and transportation projects.
Reininger stated: “It will probably not be a surprise to anyone, that we are experiencing a construction market right now that is seeing increasing costs. We are definitely not alone in this situation. The new plan that we are working on includes materially more equity.”
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