This week’s $54.4m, BBB+, 13yr solar rooftop lease securitization bond was a ground-breaking success
Posted on 16. Nov, 2013 by Sean Kidney in blog, Climate Bonds, Green Bonds,Securitisation Market, Solar Energy, United States
Last week we blogged that SolarCity and credit suisse were about to issue a new $54.4 million, climate bond – a rooftop solar lease securitization. It’s out: BBB+, 4.8%, 13 years. The long tenor is interesting – and great. And S&P’s BBB+ rating suggest those credit analysts may be beginning to understand solar.
This bond has been long-awaited by the green finance sector, who are hoping it’s the harbinger of things to come.
I did get the chance to look at the S&P opinion. Their rating reflected, as they put it, their views on over-collateralization (62% leverage; that’s how companies do credit enhancement),SolarCity‘s track record and the credit quality of the household borrowers.
They also noted that “because this asset class has a limited operating history, we expect the rating to be constrained to low investment-grade for the near future”. Presumably that means we can expect better ratings five years away.
The asset-backed securities will be paid for with the cash flow from the SolarCity‘s rooftop solar leases. This allows SolarCity to raise fresh cash to do the next wave of deals; we think of this as supporting velocity in working capital.