Renovate America has priced its fourth securitization this year of Property Assessed Clean Energy (PACE) bonds, in a $292 million deal that capped a near doubling of its investor base since the year began.
The transaction, Hero Funding 2016-4, will issue a 3.57% coupon on a $140 million, Series A-1 tranche, and a 4.29% coupon the Class A-2 notes sized at $143.63 million. Both carry final ‘AA’ ratings from Kroll Bond Rating Agency.
The tranches were originally split between $183.6 million for the A1 tranche and $100 million for the Class A2 series (along with a $8.7 million in retained bonds for overcollateralization). But Renovate made a $43.6 million shift into the premium bond tranche due to greater-than-expected investor demand for the higher-paying A-2 tranche, according to Renovate spokesman Greg Frost.
The collateral included $204.7 million in PACE assessments on 9,008 properties in 36 California counties; as well as up to $87.7 million of PACE bonds that will be subsequently added by the trust into the deal.
The bonds’ initial credit enhancement is 3% overcollateralization, but will build to target credit enhancement of 9.5%, based on the addition of a liquidity reserve account that will build up to 2% of the $292.4 million target portfolio balance, as well as an excess spread of 3.49% based on the average collateral yield of 7.99% and the blended note rate of 4.5%.
The notes are secured by 9,008 PACE assessments levied in 36 California counties. The assessments are used to finance residential renewable energy and efficiency upgrades, most notably solar panel installations.
The average balance on the assessments is $22,722.51, with a weighted average annual interest rate of 7.99% and original terms of 15.48 years. All of the deals were originated between Sept. 7 and Nov. 18 of this year, according to the company.
The rates are higher than those the company was able to establish in its HERO Funding 2016-3 deal, when a $220 million A-1 tranche was placed with a 3.08% coupon, and the A-2 notes were at 3.91%.
Investor relations head Nicole Montecalvo said that with the completion of the 2016-4 deal, the San Diego-based company had more than doubled its investor base in 2016.
The company states that the projects backed by the bonds will reduce homeowner water and energy bills by more than $298 million over the lifetime of the installed products. The company has completed upgrades on more than 80,000 homes represented in its nine overall securitizations.