SolarCity announces a third securitization of $201,500,000 in Solar Asset Backed Notes. The continuing securitization offerings are bringing much-needed financing to the solar industry.
Last year, SolarCity (Nasdaq:SCTY) made solar financing history with its first distributed solar securitization offering, for $54,425,000 of Solar Asset Backed Notes. That was followed by a second offering this April of $70,200,000. Today, the company announced its third securitization, at $201,500,000.
SolarCity’s first securitization wasn’t huge as these things go, but it paved the way for more, and each one has been increasing in size. In other respects, Greentech Media notes, this latest offering is similar to the ones that preceded it, with a slightly better yield.
Why is this important?
The solar industry has been growing quickly, with GTM Research expecting a PV system to be installed every 2.4 minutes in 2014 — up from every 4 minutes last year — and U.S. solar capacity expected to double in the next 2.5 years.
All that solar needs to be financed. With the industry’s rapid growth, it’s been challenging to find affordable financing. That’s where distributed solar securitization comes in, as a key step for installers like SolarCity, the nation’s largest residential solar provider, and for the industry as a whole.
Securitization will help lower borrowing costs and provide a funding source for not just residential but also commercial and utility-scale solar projects, resulting in billions of dollars of new potential financing for the solar industry. As we near the winding-down of the Incentive Tax Credit (ITC) and other incentives, this is especially important to keeping the industry healthy.
More details about today’s announcement:
The offering is by SolarCity’s wholly owned subsidiary, SolarCity LMC Series III, LLC, of $201,500,000 aggregate principal amount of Solar Asset Backed Notes, Series 2014-2, consisting of two classes of notes. The notes were priced on July 24, 2014 and were offered only to persons who are both (i) qualified institutional buyers as defined in Rule 144A under the Securities Act of 1933, as amended, and (ii) qualified purchasers as defined in Section 2(a)(51) of the Investment Company Act of 1940, as amended, and the rules and regulations thereunder, for purposes of Section 3(c)(7) of such Act.
The sale of the notes is expected to close on July 31, 2014, subject to customary closing conditions.
The senior class of the notes (Class A Notes) consists of $160,000,000 aggregate principal amount that will have an interest rate of 4.026%, which represents a credit spread of 1.8% over the benchmark rate, and an anticipated repayment date of July 20, 2022. The junior class of the notes (Class B Notes) consists of $41,500,000 aggregate principal amount that will have an interest rate of 5.45%, which represents a credit spread of 3.224% over the benchmark rate, and an anticipated repayment date of July 20, 2022.