A recent bankruptcy petition filed by Renovate America will not affect the outstanding securitisations backed by PACE (Property Assessment Clean Energy) financing agreements for solar panel improvements and energy efficiency in residential areas.
The Kroll Bond Rating Agency found in a report released Monday that the ABS transactions were "largely isolated" from the San Diego-based company's financial performance as the company only acted as the program administrator for PACE funding, the homeowners have to repay twice – annual tax assessments.
Homeowner's Commitments fund bonds to improve limited commitments issued by counties in the two states (California and Missouri) where Renovate has contracts.
"Under California and Missouri law, PACE assessments have the same priority as real estate taxes and other special assessments and are preferable to all non-tax liens, including mortgages," said Kroll's report. The valuations are tied to the property and also oblige future owners of the improved houses until the contracts are paid.
Renovate America, once a market leader in PACE financing who later also took out unsecured home loans, filed Chapter 11 on December 22nd, planning to liquidate its assets to pay off its creditors. These assets include unsecured consumer loans (through the Benji program) that Finance of America Mortgage says has been stalking horse, which Kroll says will represent the minimum price for a potential bankruptcy auction.
Renovate America pulled out of its original PACE business in October, according to reports on enrollment promotions.
The senior bonds of Renovate's 13 outstanding PACE ABS deals are triple-A rated by Kroll and / or DBRS Morningstar. The top ratings are backed by PACE contract security backed by mortgages on homes that are solar installed.
Renovate had issued PACE securitisations through its HERO Funding platform since 2014, including the most recent March 2020 deal of approximately $ 47 million in triple-A notes.
However, the residential PACE contracts were discontinued in 2018 after new subscription requirements were introduced for PACE contracts in California. California regulations, enacted two years ago, required borrowers to meet solvency standards, which made financing more costly and led to a class action lawsuit against Renovate over previous financing programs that wrote loans based on home values that make up, or are, borrowers' incomes Credit profiles.
In addition, according to Kroll, the company was hit by the economic disruption this year from the COVID-19 pandemic.
The coronavirus-induced slowdown has pushed solar funding through traditional consumer loans from financial firms like Loanpal, Sunnova Corp. and Vivint Solar are not hindered. These companies have helped drive green bond issuance outside of PACE by ABS investors in a market that some analysts will see well above $ 100 billion in the next year.