Distressed-debt hedge funds Diameter Capital Partners, Redwood Capital and Four Six Three Capital bought about $190 million of Brightline’s municipal bonds from Nuveen this week, according to people familiar with the matter. Nuveen offered up its entire position in the bankrupt Florida private railroad’s senior uninsured municipal bonds on Monday, just days after the company’s Chapter 11 filing. The sale, which cleared at 45 cents on the dollar, went through a process known as bids-wanted-in-competition, or BWIC, and was done on an all-or-nothing basis, Bloomberg previously reported.
The hedge funds considered the price to be a lowball offer, said the people, who asked not to be named because the information is private. Some of the bonds had previously traded about 20 cents higher. On Wednesday, the debt traded at 55 cents, according to data compiled by Bloomberg.
Representatives for Diameter and Four Six Three declined to comment. A spokesperson for Nuveen declined to comment on trading activity, and a representative for Redwood didn’t respond to requests for comment. Since Nuveen’s portfolio was put up for sale — at a speed and scale uncommon in the muni market — holdouts owning some $1 billion of Brightline debt have also signed off on its restructuring support agreement.
The company’s lawyer said on Tuesday it now has the backing of creditors holding about $4.6 billion of its $5.5 billion of debt. As part of the bankruptcy plan, Brightline will receive $258 million in bankruptcy financing from Assured and other muni investors, along with a commitment for another $490 million of debt after it exits Chapter 11.
Source: Bloomberg Markets · Summarized by HeadlinesBriefing