Vivint closes on the largest solar securitization to date

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The movement of solar from a niche power source into the mainstream has been to a degree dependent upon acceptance by the financial community, and the subsequent ability to lower the cost of capital.

For the distributed solar market, a significant innovation in this regard has been securitization, which is the pooling of assets to create a financial product that can be sold to investors. SolarCity pioneered this practice in 2013 with a $54 million securitization, and while it took years for the model to spread, it is now Vivint Solar that is leading the charge.

Vivint announced the close of a $466 million in asset backed notes this morning, as the largest solar securitization to date. According to Mercom Capital, this eclipses even a $340 million securitization by SolarCity in volume.

The offering was increased from its original size of $355 million, and was broken into two tranches. The first $400 million tranche of Class A notes received an A- rating from the Kroll Bond Rating Agency, and the $66 million in Class B notes a BB-.

In addition to this record securitization, Vivint also closed on a $345 million private placement of asset-backed notes. The company says that it plans to use the combined $811 million to either repay in full or reduce the balance of debt facilities, as well as for general corporate purposes.

Reducing interest costs appears to be the name of the game here. Vivint’s Class A notes offer an interest rate of 4.73%, and the lower-rated Class B notes 7.37%. The company notes that this refinancing will lower its total blended credit spreads by roughly 160 basis points.

“We are pleased to announce this new milestone in the evolution of our financing strategy, which optimizes and simplifies our term debt structure while allowing us to repay more expensive outstanding loans, increase advance rates, lock in attractive fixed borrowing rates and create incremental liquidity for the business,” said Thomas Plagemann, Vivint’s chief commercial officer and head of capital markets.