SolarCity’s next solar securitization is backed exclusively by residential leases and power purchase agreements.
While the company, which was purchased by Tesla last year and now does business as Tesla Energy, still relies heavily on sales of solar panels, these purchases are now funded by third-party lenders, rather than the company itself.
By comparison, the previous securitization was backed exclusively by MyPower loans, a product SolarCity has now discontinued. A revolving line of credit dedicated to MyPower loans matured in January and has been repaid, according to a regulatory filing.
The photovoltaic systems that ultimately back the new transaction are held under lease arrangements known as “partnership flip” structures, in which a tax equity investor retains a substantial interest in the financing fund, which entitles it to 99% of the investment tax credit until the “flip date”, either a specified date or once the tax equity investor realizes a specified rate of return.
TES 2017-1 will issue two classes of notes: $265 million of senior, class A notes are provisionally rated A- by Kroll; there are also $75 million of unrated, subordinate class B notes. All of the notes have a final maturity of October 2047 but are expected to be repaid by April 2028.
The total aggregate discounted balance of the assets is approximately $483.1 million, of which some 42.5% are power purchase agreements and 57.5% are lease agreements. The original tenor of each agreement is 20 years and the weighted average remaining term of the agreements is 230.7 months.
The weighted average FICO of the underlying customers is 733. Customers with a FICO equal to or greater than 700, which would generally be considered “prime,” represent approximately 69.4% of the total.
California residents represent approximately 41.4% by number of obligors, and the top three states (CA, MD, AZ) account for approximately 64.2% of obligors.