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“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.
Ince said the scotched stock offering could send a warning sign to lenders.
“With the IPO now withdrawn, it may be more difficult to find lenders, which would jeopardize their expansion plans,” he said.
With a cash flow of negative $6.8 million per month, the money-losing parent of the Brightline train service must look outside passenger revenue for a financial lifeline, said Ozgur Ince, a finance professor at the University of South Carolina.
“Their cash position looks very precarious,” Ince said. “With only $273,000 in cash and cash equivalents, they really needed the $500 million or so cash infusion from the IPO.”
Richard Rampell, a Palm Beach CPA and former board member of the RailAmerica freight line, also sees financial trouble down the track.
“At this rate, they could last maybe a year,” Rampell said. “Then they’re going to be in big trouble unless they can get some more capital.”
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