Renew Financial Group, which provides residential property assessed clean energy (PACE) financing, is preparing to issue $159.2 million in securitized bonds secured by revenues from property loans that finance renewable energy, disaster hardening and water-conserving property projects.
PACE loans are repaid from a dedicated property assessment, and are considered senior to all non-tax liens, according to ratings analysts at Kroll Bond Rating Agency. The transaction, Renew 2024-2, will issue the notes through three tranches of class A, M and B notes, all of which repay semiannually and have a legal final maturity date of November 2060.
Nomura Securities and ING Financial Markets are initial purchasers on the deal, according to KBRA.
Credit enhancement on the notes includes 3.5% in excess spread, subordination of the class M notes equaling 3.00% of the PACE assets' aggregate principal balance, KBRA said. Also, the notes benefit from a liquidity reserve that will equal 0.45% of the closing PACE assets balance. After that, the reserve amount must equal $500,000 or 0.75% and 1.50% of the remaining PACE asset portfolio on the first and second semi-annual payment dates, respectively. On the third semi-annual repayment and every payment date afterward, the percentage required is 2.00%, the rating agency said.
Renew, a rule 144a and regulation A transaction, has a four-month pre-funding period when the transaction can purchase additional receivables, according to DBRS Morningstar.
At closing, the collateral consists of $85.7 million of PACE assets issued by the California Statewide Communities Development Authority (CSCDA), and the Florida Green Finance Authority (FGFA). Also, $9.4 million in limited obligation improvement bonds that CSCDA issued, and $76.3 million in debt obligations that FGFA issued to the Master PACE Debt Obligations Agreement are also in the deal, according to DBRS.
In one potential credit positive, according to KBRA, PACE assessments in Florida that go delinquent are subject to a sale, through a tax certificate auction. After reviewing eight years of data in Broward and Miami-Dade counties—the largest counties represented in the deal—KBRA found that the rate of tax certificate sales has exceeded 95%. The rating agency assumes a recovery time of one year for the delinquent PACE assessments.
KBRA assigns AAA, A and BBB to classes A, M and B, respectively. DBRS assigns AAA and AA to the A and M notes, respectively.
