This week’s $54.4m, BBB+, 13yr solar rooftop lease securitization bond was a ground-breaking success
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.