Key Takeaways
- • Distressed-debt hedge funds Diameter Capital Partners, Redwood Capital and FourSixThree Capital bought about $190m of municipal bonds issued by bankrupt Florida rail operator Brightline from Nuveen, according to Bloomberg citing unnamed people familiar with the deal.
- • The bonds changed hands at roughly 45 cents on the dollar in an all-or-nothing bids-wanted-in-competition process, days after Brightline filed for Chapter 11 bankruptcy.
- • Some of the securities had previously traded about 20 cents higher, and the bonds recovered to about 55 cents by Wednesday according to market data.
- • Creditors holding roughly $1bn of previously unrestructured Brightline debt have joined the restructuring support agreement, bringing support to approximately $4.6bn of the company's $5.5bn total debt.
- • The restructuring plan includes $258m of bankruptcy financing from Assured and other municipal investors, with a further $490m of debt financing committed after emergence from Chapter 11.
Summary
Three distressed-debt hedge funds, Diameter Capital Partners, Redwood Capital and FourSixThree Capital, have acquired about $190m of municipal bonds issued by Brightline, the bankrupt Florida rail operator, according to a report by Bloomberg citing unnamed people familiar with the transaction. The funds bought the bonds from Nuveen this week, after the asset manager offered its entire position in Brightline's senior unsecured municipal debt for sale just days after the railroad filed for Chapter 11 bankruptcy.
The transaction was conducted through a bids-wanted-in-competition process and structured on an all-or-nothing basis. The bonds changed hands at about 45 cents on the dollar, according to people familiar with the deal. The hedge funds viewed the price as low, as some of the securities had previously traded around 20 cents higher. The bonds subsequently recovered, trading at about 55 cents on Wednesday, according to market data. Bloomberg noted the speed of the sale was unusual for the municipal-bond market given its size and its timing so soon after the bankruptcy filing.
Representatives for Diameter and FourSixThree declined to comment, Nuveen declined to discuss the trading activity, and Redwood did not respond to requests for comment.
In parallel, creditors holding roughly $1bn of Brightline debt that had initially remained outside the restructuring have agreed to the company's restructuring support agreement. Brightline's legal advisers said the agreement now has support from creditors representing approximately $4.6bn of the company's $5.5bn in total debt. The restructuring plan also provides $258m of bankruptcy financing from Assured and other municipal investors, and a further $490m of debt financing has been committed following the company's emergence from Chapter 11.
The transaction was conducted through a bids-wanted-in-competition process and structured on an all-or-nothing basis. The bonds changed hands at about 45 cents on the dollar, according to people familiar with the deal. The hedge funds viewed the price as low, as some of the securities had previously traded around 20 cents higher. The bonds subsequently recovered, trading at about 55 cents on Wednesday, according to market data. Bloomberg noted the speed of the sale was unusual for the municipal-bond market given its size and its timing so soon after the bankruptcy filing.
Representatives for Diameter and FourSixThree declined to comment, Nuveen declined to discuss the trading activity, and Redwood did not respond to requests for comment.
In parallel, creditors holding roughly $1bn of Brightline debt that had initially remained outside the restructuring have agreed to the company's restructuring support agreement. Brightline's legal advisers said the agreement now has support from creditors representing approximately $4.6bn of the company's $5.5bn in total debt. The restructuring plan also provides $258m of bankruptcy financing from Assured and other municipal investors, and a further $490m of debt financing has been committed following the company's emergence from Chapter 11.
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