Residential solar installer Sunrun is aiming to refinance a portion of "seasoned assets" by midyear as advance rates on rooftop-mounted arrays march upward and the cost of capital for such assets continues to decline.
The company's executive chairman and co-founder, Ed Fenster, laid out the plan on the company's earnings call on Feb. 28, after providing a review of the company's most recent asset-backed securitization.
"Over the last decade, strong asset performance has led the cost of capital for residential solar assets to improve steadily," he said.
"That said, general market turbulence in November and December, when we priced our $322 million ABS transaction, bucked the trend a little."
Credit Suisse, Deutsche Bank and Keybanc Capital Markets were the bookrunners on the $322 million offering, which was priced at 265 basis points over interpolated swaps in December. A $56.5 million junior 'B' tranche of bonds was not offered (PFR, 12/13).
"Although the cost of debt wasn’t all that we had hoped, we achieved lower yields and a substantially higher advance rate than the other residential solar lease securitization in market at the time," said Fenster on the call. "The print suggests that our capital cost advantage versus competitors is amplified during imperfect market conditions."
The ABS deal is fully amortizing over 30 years and four months, with a rated final maturity of April 30, 2049, and is callable in about five years, which Fenster described as a "first for the industry."
Also in December, the company closed a subordinated non-recourse loan, backed by the same pool of assets as the securitization. The loan is callable after the flip date of the underlying tax equity fund.
Taking the ABS transaction, the junior loan and the tax equity into account, the total implied advance rate against 20-year project value is between 95% and 100%, said Fenster.
"Looking forward, we still see the opportunity for higher advance rates and lower capital cost when refinancing seasoned assets," he concluded. "We expect to execute such a transaction by midyear."