Item 1.01. Entry into a Material Definitive Agreement.
On April 26, 2023, a wholly owned, indirect subsidiary (“Sol V Issuer”) of Sunnova Energy International Inc., a Delaware corporation (the “Company”), entered into an indenture (the “Indenture”) with Wilmington Trust, National Association, as the indenture trustee, and completed an issuance of solar asset backed notes that were issued pursuant to the Indenture (the “Transaction”).
Sol V Issuer issued $300,000,000 5.40% Solar Asset Backed Notes, Series 2023-1, Class A (the “Class A Notes”) and $23,500,000 7.35% Solar Asset Backed Notes, Series 2023-1, Class B (the “Class B Notes” and together with the Class A Notes, the “Notes”). The Notes have an anticipated repayment date of July 31, 2028.
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”), to institutional accredited investors under Section 4(a)(2) of the Securities Act, and to persons outside of the United States in compliance with Regulation S under the Securities Act. The Notes have not been and will not be registered under the Securities Act or the securities laws of any other jurisdiction and may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements under the Securities Act and other applicable securities laws. The Class A Notes have been rated A- (sf) and the Class B Notes have been rated BBB (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 V 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. Each project company 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 V Issuer and the Transaction Manager. The Transaction Manager will be required to provide certain administrative, collection, and other management services to the Sol V Issuer, including in respect of the subsidiaries of Sol V Issuer and the renewable energy credits distributed to Sol V 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 V Issuer and the Indenture Trustee.
The foregoing description of the Indenture is qualified in its entirety by reference to the full text of the Indenture, a copy of which is filed as Exhibit 10.1 to this Current Report on Form 8-K and is incorporated into this Item 1.01 by reference.
