Sunrun returns to securitization with $204M solar-panel deal

Residential solar power installation firm Sunrun is sponsoring a securitization of photovoltaic (PV) solar-panel leases and loans, in a deal just over half the size of its previous transaction in 2018.

The $204 million Sunrun Xanadu Issuer 2019-1, sponsored by San Francisco-based Sunrun Inc., will feature a single tranche of notes with a preliminary A- rating from Kroll Bond Rating Agency. The notes will be backed by discounted payments on $254.1 million in outstanding leases and power-purchase agreements (PPAs).

The credit enhancement for the notes includes 19.7% overcollateralization, a $4.8 million liquidity reserve account and a separate $1 million reserve account that will cover the replacement costs of inverter, energy storage and communications equipment in the installed PV systems. Excess cash flow will also be applied to CE.

Those 14,337 agreements are held by a project company in which Sunrun holds equity interests. Sunrun finances the agreements from funding obtained from investors who buy shares in the project company in order to obtain use of federal tax credits for the solar-panel systems.

The leases and PPAs cover homes in 13 states, plus Guam and the District of Columbia. California is the largest base of installations, with more than 67% of the accounts by balance in the pool.

The PPAs make up about 75% of the remaining account balances in the pool.

The average tenor of the agreements is 250 months, and weighted average remaining terms are 176 month. The WA FICO is 761, up considerably from the average FICO of 734 in Sunrun’s $378.5 million 2018 transaction.

According to Kroll, 90.1% of the photovoltaic systems by account balance belong to borrowers with FICOs greater than 700.

Kroll says the company’s managed portfolio has had “exceptional” performance with average delinquencies of more than 120 days past due at only 0.09% (as a percentage of total billings for receivables). Kroll “believes the portfolio’s performance reflects the Company’s strong underwriting, loss mitigation and collection practices,” the report stated.

Sunrun’s previous deal from November 2018 was the company’s first securitization since 2015, and had been rated A-compared to the A rating for the earlier deal.

Kroll has assigned no higher than a single-A rating to any solar lease/PPA ABS issuer, including SolarCity (now Tesla Energy) and Sunnova.