According to a report on Bloomberg.com, DesertXpress Enterprises, a company backed by Fortress Investment Group’s private-equity funds, received the green light from the California Infrastructure and Economic Development Bank to get reimbursed for the cost of a Las Vegas rail project from a future bond sale, despite the fact that it failed to answer questions from California’s finance department.
The report notes that it’s good news, but DesertXpress doesn’t yet have the authorization to sell the estimated $1.65 billion in debt. However, at least one of the required approvals could occur in early 2021, according to a report by the authority that issues municipal debt for private borrowers.
DesertXpress, which also operates under the moniker Brightline Trains, has proposed building a 170-mile, high-speed line to Las Vegas from southern Californian desert town Apple Valley. It already has approval to sell $4.2 billion in municipal bonds for that initial phase, and has said it intends to market those unrated securities, the largest such high-yield deal ever, by the end of September, according to the report.
The company is looking to extend that yet-to-be-built line from Apple Valley to existing commuter rail stations in Rancho Cucamonga and Palmdale, Calif., which would bring it closer to downtown Los Angeles.
Gayle Miller, a representative for the state’s finance department on the board, said that while the first phase is a “priority project,” the department’s questions about right-of-way considerations received no response from the company. She also noted that the firm hasn’t yet sold bonds for the initial track.
“We continue to believe that any financial transaction in this state deserves due diligence and at the very least questions answered in order to move ahead,” Miller said before casting the sole vote against the reimbursement resolution.
The company’s first passenger rail in Florida, financed through tax-free bonds issued under the name Virgin Trains USA, has suspended service because of the pandemic. It’s looking to boost ridership of the unprofitable line by adding stations.