California green-energy lender Solar Mosaic is planning a debut $138.95 million securitization of loans financing residential solar-panel system installations.
Mosaic Solar Loans 2017-1 is backed by a pool of 6,487 residential solar loans with a principal balance of $177.9 million. Mosaic, which began issuing loans less than two years ago, is issuing a single class of bonds that have a preliminary ‘A’ rating from Kroll Bond Rating Agency.
Mosaic’s asset-backed deal is the second solar loan securitization of the year, following SolarCity’s return to the ABS market this week with a packaging of its older "MyPower" solar loans, (SolarCity had primarily securitized the receivables of solar-panel leasing and power-purchase agreements in past deals).
Mosaic, one of the industry’s largest solar lenders that last August received a $220 million private equity injection from Warburg Pincus, plans to use the proceeds from the bonds sale to pay down existing warehouse debt and for general operating purposes.
Mosaic’s loans are issued primarily to prime borrowers (with a weighted average FICO of 746) who take out an average of $27,947 at 4.34% interest over 17 years to fund installations. Unlike with leases, Mosaic customers will directly receive an available 30% federal investment tax credit for green-energy improvements, and see savings of between $8 and $86 on monthly utility bills.
KBRA reports that the transaction will feature 20.53% credit enhancement that involves 19.5% overcollateralization and a 1.03% reserve account. The target CE is 24.75%, after the inclusion of an initial 4.75% yield supplement account that will be incorporated into the deal. (The yield supplement will be recalculated on each distribution date to cover receivables when APRs are under the existing Class A interest rate).
The collateral is divided between two loan types: “dual rate” loans (which are no longer originated) and “PowerSwitch" products. Both products’ costs are tied to amortization schedules put consumers on a path to pay down at least 30% of the loan balance within 18 months. The dual rate loans, which make up nearly 40% (or $71.09 million) of the pool, enforce a step-up rate on consumers that don’t hit the balance reduction mark; for the pool of $106.8 million single-rate PowerSwitch loans, the rate does not change but the principal can be re-amortized is not paid down sufficiently in the first 18 months of the loan.
Guggenheim Securities is the structuring advisor and lead bookrunner for the deal. BNP Paribas is the joint bookrunner.
Mosaic is headed by CEO Billy Parish, an environmental entrepreneur who co-founded the Energy Action Coalition. He is noted for developing a proposal to create a “Clean Energy Corps” that was incorporated into the 2009 American Recovery and Reinvestment Act.