U.S. residential solar provider, Vivint Solar, yesterday announced two separate debt financing arrangements that strengthen its liquidity position while leaving room to fund future growth. To some, the debt transactions, totaling $545 million in incremental lender commitments, might also signal a degree of lender confidence in the asset class and in Vivint during a quarter in which Covid-19 dealt the industry a massive blow.
“Given the continued uncertainty in the capital markets, we feel the approach we have taken provides an excellent combination of all-in cost of capital and advance rate, with flexibility to access the securitization markets as they fully recover,” Thomas Plagemann, chief commercial officer and head of capital markets for Vivint Solar said.
Heading into 2020, Vivint planned to refinance assets currently in its warehouse loan facility through an asset backed security (ABS) offering during the first half. Such a move would have freed up capacity in the warehouse for new assets and would have provided additional cash for Vivint’s balance sheet, but amid Covid-19’s economic fallout, the ABS market faltered for new issuance.
Instead of going to the ABS market, Vivint topped up the multi-lender revolving warehouse facility that it closed in 2019 by $245 million, for a total of $570 million in aggregate commitments. Vivint said that revolving warehouse facility’s margin will increase to 3.1%, but its maturity date, advance rate, and other material commercial terms of the facility are unchanged.
The other debt transaction that Vivint announced yesterday involved a $300 million holding company loan facility provided by the Brookfield Infrastructure Debt Fund, a global credit-focused platform managed by Brookfield Asset Management. This hold-co loan facility, which funded $200 million last Friday, allows for additional borrowings on future contracted cash flows of $100 million, and it will have an interest rate of 8.0% with a three-year maturity. BofA Securities acted as sole structurer and arranger for this hold-co loan.
“These transactions raise a significant amount of liquidity against our existing assets, provide for future debt capacity, and demonstrate our ability to access the capital markets for financing at a competitive cost of capital as we navigate the impacts of Covid-19 to our business,” Plagemann said.
Combined these two debt facilities create an implied all-in interest rate of approximately 4.4 percent on new assets originated. This cost is approximately 70 basis points lower than the cost of the Solar Asset Backed Notes, Series 2018-1 transaction Vivint Solar closed in 2018.
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