A pool of residential solar leases and power purchase agreements (PPA) associated with residential solar panels will act as collateral for $384.9 million in asset-backed securities (ABS) from the Sunrun Iris Issuer 2023-1 deal.
Sunrun will issue the notes off of a portfolio of 25,789 leases and PPAs associated with solar instillations, some of which include storage equipment, according to Kroll Bond Rating Agency, which will assign ratings to the notes. The borrowers appear to be prime, with a weighted average (WA) FICO score of 733, and customers with a FICO score greater than 700 account for about 64.4% of the photovoltaic systems in the deal.
March 31 is considered the cutoff date for the transaction, according to KBRA. At that time, the transaction had what the industry calls a total aggregate discounted solar asset balance (ADSAB) of $526.6 million, based on a discount rate of 6%. Out of that, the rating agency says, the securitization share of the PV6 ADSAB is about $459.4 million.
Deutsche Bank Securities is the structuring agent on the deal, which will issue notes through two classes. Both have a repayment date of October 2030, and a final maturity date of January 2059.
In terms of credit enhancement, the notes benefit from available cashflow after operations and certain expenses. Subordination and overcollateralization also boost credit to the notes, with the latter relative to the securitization share of the ADSAB of 6.1%. Class A notes further benefit from subordination equal to 14.1%.
Sunrun also benefits from a liquidity reserve account. For the class A notes, that equals half of the class A note rate, multiplied by the outstanding note balance, and 1% of the outstanding note balance of the class B notes. A supplemental reserve account helps too, starting out as unfunded at closing, and then accumulating additional funds over time.
KBRA intends to assign ratings of 'A-' on the $326.9 million, class A notes and 'BB-' on the $58 million, class B notes.
