Just a handful of residential solar companies have reached a point where they are able to bundle their residential solar loans and sell them as securities. With its $139 million, A-rated Mosaic Solar Loans 2017-1 transaction, Mosaic is the latest.
Securities pool together assets, in this the case the contract loans for rooftop solar systems, and then sell them as an investment. By putting the assets together it lowers the risk that defaults will affect an overall expected return on investment. This increases the likelihood that large, institutional investors will be interested in purchasing the securities as a long-term, low-risk, expected return investment and lowers the interest rates that the institutional investors (like insurance companies, companies behind 401k plans) want. Overall, securitized solar assets are still relatively new, particularly in the residential solar sector. In fact, the first residential solar securities in residential solar were offered by SolarCity (now Tesla) in 2013. It’s offered a number of securities since then and Sunrun has also offered rooftop solar securities.
The new Mosaic securities received a “Green Bond” designation, according to the International Capital Markets Association standards. “This is a huge step forward for the solar loan sector as well as for Mosaic,” said Billy Parish, founder and CEO of Mosaic. “We have sustainable and scalable funding to support our partners. With such an enthusiastic response from the investor community, we know this is just the first of many offerings.”
Mosaic’s first securities have a weighted average life of 4.06 years and are backed by a pool of $177.9 million of loans with an average FICO score of 746, the company said. “The deal generated overwhelming investor demand and achieved an oversubscription level of 5.6 times the offering size,” Mosaic stated. “Final pricing at 4.50% yield with a 4.45% stated coupon was well inside of initial price talk.”
Going ahead, Mosaic, which has originated over $1 billion in solar loans, said it expects to issue securities often. “Solar loans are a growing asset class that is gaining market share as consumers shift away from solar leases and increasingly choose to benefit from ownership of residential solar systems,” the company said.Tweet