Renovate America's next PACE ABS has higher exposure to Missouri

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Renovate America's next securitization of Property Assessed Clean Energy bonds features a slightly higher exposure to Missouri. The Show Me State accounts for 9.1% of the collateral, up from 3.4% from the sponsor’s prior deal, completed in November; the remainder is in California.

As of the end of April, 12 of those Missouri homeowners had failed to pay their installment payment due on Dec. 31, 2017. The total principal balance of the delinquent assessments is approximately $171,000, or about 0.11% of the initial principal balance of the deal. But the total delinquent amount is only $16,522, or 0.01% of the initial principal balance, according to Kroll Bond Rating Agency.

Renovate American only started funding assets through the Missouri Clean Energy District in August 2017, and this is only the second time that it has securitized assets in the state. But it has never before disclosed delinquencies in a deal it was marketing, perhaps because such data was hard to come by. PACE assessments are collected by counties and other municipalities; Renovate American stated in the past that delinquency data was only available twice a year and in a format that was not usable for investor reporting.

HERO Funding 2018-1 will issue $204.8 million of fixed-rate notes: $187.8 million of Class A notes that are provisionally rated triple-A by Kroll Bond Rating Agency and DBRS, and $17 million of Class B notes rated BBB by DBRS alone.

Barclays is the sole structuring agent, sole bookrunner and initial purchaser; Morgan Stanley and Jefferies are co-managers and initial purchasers.

Like previous deals, HERO 2018-1 includes a prefunding account. The initial collateral consists of $154.9 million of PACE bonds; the remaining collateral will be acquired within 90 days of the deal’s closing.

The composition of the initial portfolio is largely in line with that of the previous transaction, according to Kroll. The average assessment value is slightly lower ($23,658 vs. $23,764) , the average annual payment is slightly lower($2,590 vs. $2,648), the weighted average coupon is also lower (6.71% vs. 6.77%). However, weighted average term is slightly higher (17.82 vs. 17.36).

There's one other notable change, one that might help explain the increased exposure to Missouri: There are no PACE Bonds issued by San Bernardino Associated Governments.

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