LONDON (IT BOLTWISE) – Assured Guaranty has downgraded the internal ratings on Brightline Florida bonds but remains optimistic about the passenger train company’s future. The downgrade occurred due to difficulties in achieving ridership and revenue targets. Despite these challenges, the insurer sees long-term potential in the company’s development.
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Assured Guaranty recently downgraded the internal ratings on the Brightline Florida bonds to BB-plus, placing them in the below investment grade category. This decision was made after the intercity express line struggled to achieve forecast ridership and revenue. In addition, the postponement of interest payments and the request for an extension of mandatory tenders caused unrest among investors.
Although the downgrade may seem concerning at first glance, Assured Guaranty remains optimistic about Brightline’s long-term prospects. The company’s CEO, Dominic Frederico, emphasized that Brightline is going through the typical growing pains of a startup. Problems with the selection of routes and the number of available wagons are part of these challenges, but these will be resolved over time.
Assured Guaranty holds 51% of Brightline’s senior bonds, giving the insurer a controlling voice in enforcing action should the need arise. This position gives the company a degree of security as it is in the top layer of the capital structure, with significant equity and subordinated debt underneath.
In addition to the Brightline developments, Frederico also spoke positively about Assured Guaranty’s exposure to the Puerto Rico Electric Power Authority. He pointed to previous legal decisions favorable to the company and expressed confidence that the company will successfully defend its legal claims.
Overall, Assured Guaranty is benefiting from record levels of municipal bond issuance and strong demand for their insurance, particularly on large infrastructure projects. These developments are also reflected in the results of BAM Mutual, another leading provider of municipal bond insurance, which is also benefiting from an increase in bond volumes.
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