SAN FRANCISCO - Sunrun Inc . (NASDAQ:RUN), a leading player in the residential solar sector, has successfully priced a securitization involving leases and power purchase agreements, with an issuance of $230 million in notes. The transaction, announced today, is set to close by April 17, 2024.
The securitized assets consist of a diversified portfolio of 27,094 solar rooftop systems across 19 states and Washington D.C., which have been in service for an average of 6.75 years. The majority of the portfolio has reached the tax equity fund 'flip point', a significant phase in tax equity structures. The notes, which are rated 'A' by Kroll, have a weighted average life of 7 years and a final maturity date of February 1, 2055, and will fully amortize over the remaining contractual life of 13.25 years.
The notes were priced at a 6.27% coupon, reflecting a credit spread of 195 basis points over the benchmark swap rate at the time of pricing. This represents a 37.5 basis point improvement from Sunrun's previous senior securitization in February and is 45 basis points lower than the one in September 2023. The yield on the notes stands at 6.328%, and the initial balance represents an advance rate of approximately 85% on the securitization share of the present value, using a 7.5% discount rate.
Sunrun's Chief Financial Officer, Danny Abajian, highlighted the company's strong track record as a factor in achieving the lowest spread for similarly rated transactions in the sector since 2021. The portfolio, jointly owned by National Grid (LON:NG) and Sunrun, will see National Grid receive the majority of cash flows through 2042.
Bank of America (NYSE:BAC) acted as the sole structuring agent for the transaction and served as joint bookrunner with Truist and KeyBanc.
The securitization marks a strategic financial move for Sunrun, which has been a pioneer in offering clean energy as a subscription service since 2007.
The information for this article is based on a press release statement from Sunrun Inc.
InvestingPro Insights
In the wake of Sunrun Inc.'s latest securitization news, a glance at the company's financial health through InvestingPro data shows a mixed picture. With a market capitalization of $2.86 billion, Sunrun trades at a low Price / Book multiple of 0.55, suggesting the market may be undervaluing the company's assets relative to its share price. This could be of interest to value-oriented investors looking for potential bargains in the market.
However, the company's financials also reflect challenges. Sunrun's revenue has seen a decline of 2.65% over the last twelve months as of Q1 2023, and even more concerning is the quarterly revenue drop of 15.2% in Q1 2023. Moreover, the company's operating income margin stands at a concerning -36.31%, indicating significant losses relative to its revenue.
InvestingPro Tips further illuminate potential concerns for investors. Sunrun operates with a significant debt burden and may face difficulties making interest payments on its debt, which is an important consideration for risk assessment. Additionally, the company is not expected to be profitable this year, and analysts have revised their earnings downwards for the upcoming period. For those considering an investment in Sunrun, these factors could be crucial in their decision-making process.
To gain more comprehensive insights and access additional InvestingPro Tips for Sunrun, investors can explore the detailed analytics available at Investing.com/pro/RUN. There are 13 more tips listed in InvestingPro that could provide a deeper understanding of the company's potential and risks. For those looking to subscribe, use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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