Solar Mosaic, one of the earliest providers of loans to solar installers and homeowners, is returning to the asset-backed securities (ABS) market to sponsor a $243.7 million deal backed by residential solar equipment.
Deutsche Bank Securities, BNP Paribas, RBC Capital Markets and Société Générale are lead managers and initial note purchasers on the transaction, Mosaic Solar Loan Trust, 2022-2, according to a pre-sale report from Kroll Bond Rating Agency.
Mosaic's ratings drivers include strong borrower demographics that resemble prime obligors on other asset classes. For instance, the average customer in Mosaic's statistical pool is a homeowner with a weighted average (WA) FICO score of 741, slightly lower than scores ranging from 750 to 753 on transactions dating back to June 2021. Also, 88.6% of the obligors remit payments on their solar systems via ACH systems, KBRA noted. On average, the loans in the pool have a balance of $42,104, according to KBRA.
Mosaic 2022-2 will not include a pre-funding period, unlike previous Mosaic transactions, KBRA said. The collateral pool will be static, and not include a capitalized interest account.
Also, as KBRA noted, the deals' YSOC discount rate is 3.25%, compared with 5.30%. Higher collateral interest rates and the higher YSOC discount rate have raised the effective collateral interest rate by 188 bps, according to KBRA.
The underlying loans finance panels or modules, inverters, electricity storage, charging and monitoring equipment. Other aspects of financing include prepaid operations and maintenance agreements, plus related landscaping, roofing and electrical systems upgrades, KBRA noted.
One particular drawback, however, is that the absence of through-the-cycle performance data, according to Fitch Ratings.
"While more robust than other solar lenders, observed performance data for Mosaic originated loans of approximately six years is relatively limited compared to residential solar loans terms of 25 to 30 years," according to a note on expected ratings for the deal from Fitch analysts.
The notes will benefit from credit enhancement of overcollateralization, subordination, a reserve account and excess spread. Initial enhancement levels are 53.05%, 18.3%, 11.5%, and 7.1% on the A, B, C, and D classes of note, respectively.
KBRA expects to assign ratings of 'AA-', 'A-', 'BBB-' and 'BB-' on the class A, B, C, and D notes, respectively.
The notes have an expected final scheduled payment date of Jan. 21, 2053.
