SolarCity Corp (SCTY) Announces More Asset-Backed Notes

SolarCity Corp (SCTY) Announces More Asset-Backed Notes
By BrokenSphere (Own work) [CC BY-SA 3.0 or GFDL], via Wikimedia Commons

SolarCity Corp (NASDAQ:SCTY) has announced a new set of solar asset-backed notes. They were priced on Thursday and offered to qualified institutional buyers and purchasers. The company expects the sale of the notes to close on July 31 and bring in $201.5 million.

Details on SolarCity’s new notes

The notes are being offered in two classes. The Class A notes are the senior notes, and they have an aggregate principal of $160 million and a 4.026% interest rate. That represents a credit spread that’s 1.8% higher than the benchmark rate. SolarCity expects to pay back the Class A notes by July 20, 2022.

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The Class B notes, which are the junior notes, carry an aggregate principal of $41.5 million and a 5.45% interest rate. That’s a 3.224% credit spread higher the benchmark rate. SolarCity also expects to repay those notes on July 20, 20122.

SolarCity is securing the notes using the cash flow from a pool of photovoltaic solar systems it owns and leases out, as well as power purchase agreements.

SolarCity’s third offering

This is the third set of asset-backed securities offered by SolarCity, and it’s pretty similar to the previous two offerings. However, this set is quite a bit larger than those offerings. The solar panel system installer started selling these notes late last year as a way to fund the systems it installs and leases out to homeowners.

Green Tech Media reports that SolarCity has been getting bolder and bolder with its notes offerings. While last year it only included around 5,000 systems in the pool, this time there are nearly 16,000 systems in it, which cover an aggregate of 118 megawatts.

It’s unsurprising that SolarCity is selling more notes. It’s likely that the significantly increased amounts are because investors are starting to become more comfortable with this asset class. According to analysts at Credit Suisse, the company was able to raise $1.71 per watt, plus tax equity of $1.80 to $220 a watt. This suggests that at the very least, the company can raise around $3.50 per watt. The Credit Suisse team suggested that now SolarCity can grow quickly without having to offer convertible notes or secondary stock offerings to fund its main business.

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