Distressed funds buy $190M of Brightline bonds from Nuveen

Three distressed-debt hedge funds – Diameter Capital Partners, Redwood Capital and FourSixThree Capital – purchased about $190 million of Brightline’s senior unsecured municipal bonds from asset manager Nuveen this week, according to people familiar with the transaction. The sale followed Brightline’s Chapter 11 filing.

Nuveen ran a bids-wanted-in-competition process and offered its entire stake on an all-or-nothing basis. The block changed hands at roughly 45 cents on the dollar, people familiar with the deal reported. Some of the individual securities had traded about 20 cents higher earlier; after the purchase market prices recovered to about 55 cents on the dollar by Wednesday.

Representatives for Diameter and FourSixThree declined to comment. Nuveen declined to discuss the transaction and Redwood did not respond to requests for comment. Market participants described the sale as unusually quick for the municipal-bond market given the position’s size and the timing so soon after the bankruptcy filing.

Separately, creditors holding roughly $1 billion of Brightline debt that initially remained outside the restructuring have agreed to the company’s restructuring support agreement, Brightline’s legal advisers confirmed. The agreement now has backing from creditors representing about $4.6 billion of the company’s $5.5 billion in total debt.

The restructuring plan includes $258 million of debtor-in-possession financing provided by Assured and other municipal investors, and Brightline has secured a further $490 million of committed financing for use after it emerges from Chapter 11.