| Item 1.01. | Entry into a Material Definitive Agreement |
On November 30, 2020, a wholly owned, indirect subsidiary (the “Sol II Issuer”) of Sunnova Energy International Inc., a Delaware corporation (the “Company”), entered into an indenture (the “Indenture”) with Wells Fargo Bank, National Association, as the indenture trustee, and completed an issuance of solar asset backed notes that were issued pursuant to the Indenture (the “Transaction”).
The Sol II Issuer issued $209,100,000 aggregate principal amount of 2.73% Solar Asset Backed Notes, Series 2020-2 Class A (the “Class A Notes”) and $45,600,000 aggregate principal amount of 5.47% Solar Asset Backed Notes, Series 2020-2 Class B (the “Class B Notes” and, collectively with the Class A Notes, the “Notes”). The Notes have an anticipated repayment date of October 30, 2030.
The Notes were offered within the United States only to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”), and to persons outside of the United States in compliance with Regulation S under the Securities Act and with respect to the Class B Notes only, that are qualified institutional buyers. The Notes have not been registered under the Securities Act or the securities laws of any other jurisdiction. The Class A Notes have been rated A- (sf) and the Class B Notes have been rated BB- (sf) by Kroll Bond Rating Agency, LLC.
The Collateral
The Notes are secured by, and payable from the cash flow generated by, the membership interests in the Sol II Issuer’s wholly owned, direct subsidiaries and the sale of renewable energy credits. Each such subsidiary owns a managing member interest in a project company. Each project company owns a pool of photovoltaic systems, related lease agreements or power purchase agreements and other related solar assets. With one exception, each of the project companies is jointly owned with a third-party investor.
Sunnova TE Management, LLC, a Delaware limited liability company and a wholly owned, direct subsidiary of the Company (the “Transaction Manager”), will act as transaction manager pursuant to the terms of a Transaction Management Agreement between the Sol II Issuer and the Transaction Manager. The Transaction Manager will be required to provide certain administrative, collection, and other management services to the Sol II Issuer, including in respect of the subsidiaries of Sol II Issuer and the renewable energy credits distributed to Sol II Issuer by them.
Events of Default and Amortization Events
The Indenture contains events of default that are customary in nature for solar securitizations of this type, including, among other things, (a) the non-payment of interest, (b) material violations of covenants, (c) material breaches of representations and warranties and (d) certain bankruptcy events. An event of default will also occur with respect to the Notes if they are not paid in full at their rated final maturity. The Notes are also subject to amortization events that are customary in nature for solar securitizations of this type, including (a) the occurrence of an event of default, (b) a debt service coverage ratio falling below certain levels, (c) failure to maintain insurance, (d) the aggregate expenses of the project companies rising above certain levels and (e) failure to repay the Notes in full by their anticipated repayment date. The occurrence of an amortization event or an event of default could result in accelerated amortization of the Notes, and the occurrence of an event of default could, in certain instances, result in the liquidation of the collateral securing the Notes. In connection with the Transaction, Sunnova Energy Corporation, a wholly owned, direct subsidiary of the Company, issued a performance guaranty covering (a) the performance of certain obligations of its affiliates who manage or service the project companies and the collateral securing the Notes, (b) the performance obligations of the Transaction Manager under the Transaction Manager Agreement and (c) the payment of certain expenses incurred by the Sol II Issuer and the Indenture Trustee.
Consent and Amendment
In connection with the Transaction, on November 30, 2020, a wholly owned subsidiary (the “Equipment Borrower”) of the Company entered into that certain Consent and Amendment (the “Consent and Amendment”), which amends that certain Credit Agreement, dated as of December 30, 2019 (as amended, the “Equipment Credit Agreement”), by and among the Equipment Borrower, certain other subsidiaries of the Company, Credit Suisse AG, New York Branch, as agent, and the lenders and the other financial institutions party thereto. The Consent and Amendment amended the Equipment Credit Agreement to remove certain indirect subsidiaries of the Equipment Borrower from the scheduled list of Managing MemberCos and Project Companies (in each case as defined in the Equipment Credit Agreement) under the Equipment Credit Agreement.
The foregoing descriptions of the Indenture and the Consent and Amendment are qualified in their entirety by reference to the full text of the Indenture and the Consent and Amendment, copies of which are attached hereto as Exhibits 4.1 and 10.1 to this Current Report on Form 8-K and are incorporated herein by reference.
