Tesla Energy is marketing its second solar-panel loan and lease securitization in just over a month, according to a presale report from Kroll Bond Rating Agency.

Tesla (formerly SolarCity) is planning a $130.9 million bond sale backed by the receivables from power-purchase agreements (PPA) and leases to homeowners who installed photovoltaic solar-panel energy systems since early last year.

The contracts in the deal are almost entirely made up of PPAs (96.7% of the pool), unlike Tesla’s 2017-1 transaction launched in October that was nearly evenly split between loans and leases.

The TES 2017-2 transaction involves two classes of notes: a $99 million Class A series with a preliminary A- from Kroll; and a $31.9 million Class B tranche with a BB rating.

The Class A note notes benefit from a 23% overcollateralization (the underlying agreements and leases have an aggregate balance of $170.1 million), along with 18.8% subordination of the B notes; liquidity and inverter replacement reserve accounts (amounts to be determined), and excess cash flow (undisclosed in the presale report published Monday).

Tesla CEO Elon Musk
Tesla CEO Elon Musk Bloomberg News

The transaction has a “full turbo” feature in which excess cash will be directed at principal payments of both classes.

The deal is backed by 11,988 PPAs and 458 lease agreements across 18 states, with balances ranging from $1,431 to $61,674. The loans are underwritten to prime borrowers with an average score of 745, on contracts averaging 20 years (240 months).

The weighted average seasoning of the contracts is eight months. The notes are collateralized by payments from master-lease agreements with two lessee organizations owned jointly by Tesla (a 5% share) and Citibank.

Tesla took over SolarCity in a controversial $2.6 billion acquisition last year critics saw as a bailout of a struggling, over-leveraged company co-founded by Tesla chief executive Elon Musk's two cousins (Tesla was previously the top shareholder in SolarCity).

The addition of SolarCity expanded Tesla into sustainable power generation to integrate with its power storage and transportation divisions.

All of the loans in Tesla Energy's new securitizations are third-party originations; last year, Tesla/SolarCity dropped the underwriting of loans through SolarCity's now-defunct MyPower loan product.

As of June 30, Tesla Energy had installed more than 360,000 solar energy systems across the country, representing 3.1 gigawatts of installed capacity, according to KBRA.

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