Florida passenger railroad Brightline won court approval to tap a $258 million bankruptcy financing despite an objection from an investment fund.

U.S. Bankruptcy Judge Mark Hall in New Jersey approved the debtor-in-possession loan on Tuesday, rejecting an objection from the investment fund co-managed by Knighthead Capital Management and Certares Management.

The fund said in a Sunday court filing that the loan could impede its lawsuit against Brightline's West Coast rail project over an alleged fraudulent asset transfer.

Judge Hall said the financing is necessary to carry Brightline through bankruptcy and that the railroad exercised sound business judgment in choosing its lenders.

Brightline also negotiated with creditors who owned more than $1 billion originally excluded from its bankruptcy plan. A lawyer representing a group of Brightline East noteholders said on Tuesday they will now receive primary equity and warrants and the noteholders' interest reserve will be protected from the debtor.

Brightline's holding company filed for chapter 11 last week after failing to negotiate an out-of-court deal to restructure its $5.5 billion in debt.

Knighthead and Certares argued in a Sunday court filing that the financing could hurt their recovery in the lawsuit. The firms in 2023 sued Brightline's BL West Holdings, which operates trains in California and Nevada.

The lawsuit alleged that BL West had improperly shifted equity to Brightline's private-equity backer Fortress Investment Group and out of the lenders' reach. BL West isn't part of the bankruptcy and operates independently of Brightline's Florida entities.

Brightline resolved the concerns tied to its bankruptcy financing by amending its plan to include protections for Knighthead and Certares, which Judge Hall said addressed the objections.

Brightline had been struggling to service the debt it piled on to help fund the construction of the 235-mile track from Miami to Orlando. While the ridership was steadily increasing, revenue didn't grow enough to keep up with the debt load.

The company began negotiating a debt restructuring more than a year ago. Brightline continues to run its railroad through an operating company that remains outside of bankruptcy.

In addition to the bankruptcy loan by Assured Guaranty, First Eagle Investments, Invesco, BlackRock, Nomura and Nuveen, Brightline can tap $490 million in exit financing from those lenders upon its emergence out of bankruptcy.