Sunrun closes $715M senior securitization of residential solar, battery systems

Sunrun has closed the securitization of leases and power purchase agreements, known as Sunrun’s solar-as-a-service offering, and raised additional subordinated non-recourse financing. The securitization transaction was structured with two pari passu tranches of A- rated notes and a single class of BB+ rated notes. The $440mm Class A-1 notes were marketed in a public asset backed securitization whereas the $275mm Class A-2 notes were privately placed. The Class A-1 and A-2 notes were both priced with a coupon of 6.60%. Strong investor demand for the Class A-1 notes resulted in a spread of 240bps and a yield of 6.78%, while also enabling the Class A-1 notes to be upsized by $100mm to $440mm. The spread of 240bps represents an improvement of 25bps from Sunrun’s 2023-1 asset backed securitization in May 2023. The Class A-1 and A-2 notes represent an advance rate of approximately 67.4% of the securitization share of the aggregate discounted solar asset balance using a 6% discount rate. The Class A-1 and A-2 notes have an expected weighted average life of 6.53 years, an Anticipated Repayment Date of July 30, 2030 and a final maturity date of January 30, 2059. Similar to prior transactions, Sunrun raised an additional subordinated subsidiary-level non-recourse financing totaling $253mm, after the securitization transaction closed, which increased the cumulative advance rate obtained by Sunrun. The terms associated with the securitization and subsequent subordinated non-recourse financing, taken together with related tax equity proceeds, upfront incentives, and customer prepayments, net of transaction fees and required cash reserves, are equivalent to a cumulative advance rate that is consistent with the company’s prior commentary of approximately 79% to 84% of the company’s contracted Subscriber Value metric using a 6% discount rate. Sunrun obtained actual net proceeds that slightly exceeded this range in the most recent series of transactions, with the debt sizing benefiting from approximately a quarter of the assets in these financings being seasoned as they have been placed in service over 6 years ago. In connection with including these seasoned assets in the financing, Sunrun also repaid $255 million in total debt, including senior and subordinated term loans maturing in 2024 and 2029, respectively.