“If I was Nuveen (who has been reported as owning over $600 million of their [Virgin Trains USA] bonds), I would be getting very nervous.”

nuveen_investments_108841

 

Robert Auwaerter wrote in an inter-office email on July 20, 2019, “If I was Nuveen (who has been reported as to owning over $600 million of their bonds) I would be getting very nervous. If Nuveen starts unloading any of their position the Street will pull away very fast and bond prices will plummet.”

Mr. Auwaerter is Indian River Shores’ representative on the Indian River County, FL Metropolitan Planning Commission (MPO).  For 32 years, Mr. Auwaerter managed the bond and money market group at Vanguard responsible for $750 billion of assets.

“After only 18 months, the ridership and revenue for Virgin Trains has hit a wall.  Rather than continuing its predicted ramp up, Virgin Trains has plateaued well below its lofty projections,” replied Dylan Reingold, Indian River County, FL County Attorney.

In a document issued to bond investors in late 2017, Virgin Trains Base Case Projection, projected its 2019 ridership at 2,095,555 with revenue of $ 77.9 million.  The 2020 projection is 2,936,802 riders and revenue of $ 144.8 million.

Fitch gave Brightline’s late 2017 bond issue a grade of BB-, a junk-bond grade that reflects “an elevated vulnerability to default risk.”

Here is the actual performance data from Virgin Trains collected from monthly revenue and ridership reports and other Virgin Trains data.

QUARTER                 RIDERSHIP           REVENUE

First: 2018                      74,780                     $ 663

Second: 2018                106,090                     $ 1.5

Third: 2018                   159,586                     $ 2.9

Fourth: 2018                 238,749                     $ 4.7

First: 2019                     244,178                     $ 5.8

Second: 2019                237,142                     $ 5.1

 

Ridership 2

 

MONTHS

October 2018:                60,013                      $ 1.0

November 2018             80,660                      $ 1.5

December 2018:            98,076                       $ 2.2

January 2019:                73,568                       $ 1.7

February 2019:              78,707                            –

March 2019                    91,903                      $ 2.2

April 2019                      71,308                       $ 1.8

May 2019                       85,740                        $ 1.7

June 2019                       80,094                       $ 1.6

July 2019                        83,742                       $ 1.7

 

Ridership

You can see for yourself from the numbers “Virgin Trains has plateaued.”

This must be why Virgin is changing its business model in favor of adding additional stops in South Florida.

Jeff Ostrowski wrote in the Palm Beach Post on June 24, 2019 that “in a shift from its original plan of connecting Miami, Fort Lauderdale and West Palm Beach with express service, the rail company previously known as Brightline now says it will add stops at PortMiami, Aventura and on city-owned property next to Boca Raton’s library.”

“We expect that these stations, which are anticipated to be operational in 2020, have the potential to ultimately generate in excess of two million additional annual trips along our rail system,” Virgin Trains said late Friday in a monthly report to bondholders.

Acela, along the Northeast Corridor stops in, among others locations, Philadelphia (population = 1.6 million), Washington, DC (population = 633,049), Baltimore (population = 619,493) and Boston (population = 685,094).  All cities have metropolitan transportation available from their stops.

Boca Raton’s population is 98,150.  Aventura’s is 38,202.

The additional stops will put Virgin Trains in direct competition with Tri-Rail, the heavily government-funded commuter service. While it does a run a little slower, its fares are roughly about 25% of Virgin Trains.

Tri-Rail has 18 stops including West Palm, Ft. Lauderdale and Miami Airport.  A Second Tri-Rail has been proposed between Jupiter and Downtown Miami.

What about Richard Branson and Virgin Trains?

Richard_Branson_(pic_5)

In Form S-1 it indicates Virgin Trains will be a 5% or less stockholder.

railwayage.com wrote that: “There are no percentages of ownership listed [in the Form S-1], so we do not know officially how large a stake Virgin Group has in the Brightline venture, or how much Virgin Group paid for it, if anything. We have learned from a source close to the deal that Virgin’s share is about 3%, a small amount, but we also can reasonably expect that Virgin Group would exercise a great deal of power concerning the venture, since it will control the brand, which is the ‘public face’ of the railroad.”

The Virgin License Agreement has an initial term of 20 years, subject to renewal for up to two additional ten-year periods.  There are certain circumstances under which the Virgin License Agreement may be terminated.

Even with a small minority position Virgin Trains controls the railroad’s reputation before the public, including customers and potential investors, while charging substantial fees (emphasis added) for the use of its brand, trademarks and other intellectual property associated with the “Virgin Trains USA” brand.

The Ledger 2/18/2019

“There’s no compelling reason to believe it’s actually going to work,” said Matt Fabian, a partner at Municipal Market Analytics, a bond research firm in Concord, Mass.

MMA’s core business is to provide strategic market and credit analysis and commentary on current, historical and quantitative conditions of the US municipal sector.  In 2012, MMA established its professional consulting division that provides independent analysis on important municipal issues.  The division’s projects have involved municipal risk and liquidity management, credit risk assessments and default/loss modeling.

 

logo_VirginTrains

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

We started a little bit later than we thought, but actually it’s very much in line with what our projections were,” Edens said.  Edens, the head of Fortress Investment Group and owner of the NBA’s Milwaukee Bucks

 

 

aid the rail service’s shiny new trains traveling up to 125 mph will prove an attractive alternative to the “miserable drive” between Central Florida and South Florida.

Palm Beach Post June 24, 2019 Jeff Ostrowski

 

In a document issued to bond investors in late 2017, Virgin Trains projected its 2019 ridership at 2,095,555 with revenue of $ 77.9 million.

 

Virgin Trains aims to work quickly to build a new station in Boca Raton, a project it predicts will boost ridership on the for-profit rail service.

In a shift from its original plan of connecting Miami, Fort Lauderdale and West Palm Beach with express service, the rail company previously known as Brightline now says it will add stops at PortMiami, Aventura and on city-owned property next to Boca Raton’s library.

Related: Billionaire behind Brightline says he’s “very, very happy” with new train’s financial performance

“We expect that these stations, which are anticipated to be operational in 2020, have the potential to ultimately generate in excess of two million additional annual trips along our rail system,” Virgin Trains said late Friday in a monthly report to bondholders.

July 22 Same

 

 

“The ridership and revenue for Virgin Trains has hit a wall only 18 months after beginning operations,” Reingold said. “Instead of continuing its predicted ramp up, Virgin Trains has plateaued well below its lofty projections.”

The problem is that the Tri-Rail commuter trains also run between West Palm Beach and Miami. Here is the other problem– safety. On a railroad with only two tracks, VT and Florida East Coast RR are going to be running 100 car plus long freight trains going about 50-60 mph, high speed long-distance passenger trains traveling in theory at 110 mph (at that speed it takes about 1.9 seconds to cover a football field), and mid-speed commuter trains moving at probably about 20-60 mph (taking into account decelerating into stations and then pulling out). If that is not a disaster waiting to happen, I do not know what is.

 

Others take a more pessimistic view of Brightline’s prospects.

The Ledger 2/18/2019

“There’s no compelling reason to believe it’s actually going to work,” said Matt Fabian, a partner at Municipal Market Analytics, a bond research firm in Concord, Mass.

MMA’s core business is to provide strategic market and credit analysis and commentary on current, historical and quantitative conditions of the US municipal sector.  In 2012, MMA established its professional consulting division that provides independent analysis on important municipal issues.  The division’s projects have involved municipal risk and liquidity management, credit risk assessments and default/loss modeling.

 

 

 

 

 

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