The Deutsche Bank–led offering of $104 million of securities backed by Property Assessed Clean Energy (PACE) bonds issued by Western Riverside Council of Governments (WRCOG) priced today according to a person familiar with the deal.

The deal, HERO Funding Class A Notes, Series 2014-1 , issued a single tranche of 10-year notes, that are rated 'AA' by Kroll Bond Rating Agency. It priced at a coupon rate of 4.75%.

WRCOG’s PACE bond portfolio is secured by 5,898 PACE assessments levied against 5,890 residential properties located in the County of Riverside, CA. All of WRCOG’s clients are in Riverside but the company plans to expand into new jurisdictions throughout California and Florida.  

State and local governments introduced PACE programs in 2008; as of December 2013, 31 states in the U.S. have passed legislation allowing municipalities to create PACE programs. The programs enable local governments to finance renewable energy and energy efficiency projects on privately owned residential, commercial, agricultural, and industrial properties, according the Kroll Bond Ratings Agency presale report. KBRA was the sole ratings agency on the deal.

PACE programs have a short track record, even shorter than solar; but the credit quality of PACE loans is generally stronger than that of solar contracts. That is because PACE loan borrowers repay their loans through long-term special tax assessments secured by senior liens on their properties, according to a Jan. 14, Moody’s Investors Service report

SolarCity priced the first securitization of distributed solar energy assets in November 2013. The $54.4 million private placement priced with a coupon rate of 4.80%. Standard & Poor’s rated the notes, backed by a pool of solar contracts, ‘BBB+’.  


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