Mosaic Solar Loan Trust 2021-2 has returned to the securitization market with a $191 million transaction backed by consumer loans taken out to purchase residential solar systems.
Known in the securitization market as Solar Mosaic 2021-2, the issuer has come to market with term asset-backed securities nine times previously, beginning in 2017. For its tenth deal, Mosaic is looking to securitize a deal that is the lightest in comparison with previous offerings.
BNP Paribas, Deutsche Bank Securities and RBC Capital Markets are the lead managers and initial purchasers on the deal.
The 3,002 loans underlying loans have had just two months of weighted average seasoning, the lowest since the 2020-2 deal priced in October 2020 with four months of seasoning, according to an initial ratings assessment from Kroll Bond Rating Service. Solar Mosaic 2021-2’s weighted average FICO score is 750, at least three points lower than previous weighted average FICO scores of previous collateral pools going back to the 2021-1 issuance from June 2020.
In a more fundamental way, pre-permission to operate (PTO) loans will comprise 10 percent of the Mosaic 2021-2’s underlying collateral pool, a dramatic increase from the Mosaic 2021-1 deal, which had no pre-PTO loans.
A pre-PTO loan is a financing where the collateralizing solar energy system has been installed, but has not yet achieved permission to operate.
If a loan misses the window to achieve PTO status, which differs according to the state where the panel will be installed, Mosaic is required to repurchase such loans or replace them with a qualified substitute solar loan and pay for any shortfall.
KBRA noted several ways that Mosaic mitigates the risk of including this level of pre-PTO loans in the pool. Historical data shows that about 86 percent of the pre-PTO loans did achieve PTO status by the 90-day mark, and 92 percent had done so by 120 days out.
About 45 percent of the total collateral pool, amounting to about $98.2 million will be prefunded at closing. During this period, the trust can purchase additional solar panels that meet the eligible solar loan criteria, as long as the trust does not breach certain concentration limits with the additional purchases. KBRA notes that no pre-PTO loans will be eligible for the supplemental purchases.
