The deal will comprise $92.5 million of Class A notes and $7.5 million of Class B notes, according to a report from Kroll Bond Rating Agency Inc., which rated the first tranche BBB, two levels above junk, and the smaller one at B, five levels below investment grade.
This is the solar industry’s sixth securitization in the U.S., and the third since July. Such deals are becoming more common as rooftop power becomes more widely used and developers seek ways to turn long-term sources of revenue into capital they may reinvest now.
“There is a market for it,” Cecil Smart, a senior director at New York-based Kroll, said in an interview Monday. “Otherwise, there wouldn’t be six.”
The AES notes will be secured by revenue from 1,548 solar residential, commercial, industrial and small utility power plants in six states and the U.S. Virgin Islands, according to the Kroll report issued on Sept. 25. They all have long-term deals to sell electricity.
The notes will be issued by Aurora Master Funding, an AES unit, and Morgan Stanley is acting as adviser. Calls to AES weren’t returned on Sept. 28.
SolarCity Corp., the biggest U.S. rooftop solar installer, was the first company to securitize a portfolio of solar leases, in 2013. The company completed a similar deal worth $124 million in August, its fourth. Sunrun Inc. announced a $111 million offering in July.
Asset-backed securitization deals, typically backed by mortgages or auto loans, are often larger.
The solar bond offerings are “modest in size,” Smart said. “The market is still finding its legs.”
©2015 Bloomberg News
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