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All Aboard Florida sets talk on upsized $405M of 5-year PIK notes

All Aboard Florida is guiding its $405 million offering of senior secured PIK-toggle notes in the 12% area, via joint bookrunners J.P. Morgan and Morgan Stanley, along with co-manager BMO. The company upsized the deal by $15 million to account for additional interest reserve.

Books close at 2:00 p.m. EDT tomorrow, June 17, with pricing to follow.

Some investor-friendly revisions have also been made to the structure. The 144A-for-life deal is set to mature in 2019, with the first call date pushed out six months, to 2.5 years, from two years, at par plus 50% of the coupon. The notes can also be redeemed at par plus 100% of the coupon with proceeds of a government loan during the first 2.5 years, which is revised from par plus 75% of the coupon during the first two years, and the equity claw is now 25%.

The issue is also now structured to be 50% cash pay/50% PIK initially and after the opening date, the notes must be 100% cash pay if the company has cash sufficient to pay all interest. Initially, the deal was structured with more flexibility on subsequent payments; either 100% cash or 50% cash/50% PIK.

Note the unique senior security of the offering. Historically, just four of 131 PIK toggle deals were secured and sold regular-way, while a three others were secured and issued by a distressed exchange, according to LCD.

The express passenger rail operator is seeking proceeds to finance all or a portion of the design, construction, and development of a rail project extending from Miami to West Palm Beach, and to fund pre-opening expenses and working capital.

Leads are guiding investors toward triple-C ratings. As stated in the offering memorandum, the company is required to get ratings from two of three agencies within 90 days of issuance, otherwise the coupon steps up by 25 bps.

Parent entity Florida East Coast Industries was in market just two months ago with a bond-refinancing deal. An $875 million issue of 6.75% secured notes due 2019 was completed at par, but now trades around 105, yielding about 5.3%, while a $275 million issue of 9.75% unsecured notes due 2020 was also issued at par, but now is pegged at roughly 104.75, yielding about 8.42%, according to sources. Ratings are B/B3 and CCC+/Caa1, respectively. Both were issued under Rule 144A for life, with first call premiums at par plus 75% of the coupon.

Issuance for All Aboard’s offering is via AAF Holdings LLC & AAF Finance Company. All Aboard Florida is an intercity passenger rail project being developed by Florida East Coast Industries (FECI) that will connect Miami to Orlando, with intermediate stations in Fort Lauderdale and West Palm Beach. This rail service will provide Floridians and visitors a viable transportation alternative to congested highways and airport terminals. All Aboard Florida will be the first privately owned, operated, and maintained passenger rail system in the U.S. – Joy Ferguson