Renovate America securitizes $320.2 million of PACE bonds

Written By: Stratton Report
September 22, 2016

renovate america

On September 22, Renovate America announced the closing of a $320.2 million securitization of PACE bonds . According to Renovate, this is the largest such deal completed by any issuer.

The securitization, HERO Funding 2016-3, is a designated green bond and includes class A1 and A2 notes rated AA (sf) by Kroll and AA (sf) by DBRS. Moody’s Investor Service also assigned the notes a Green Bond Assessment of GB1 – its highest GBA grade.

The notes are secured by 12,394 PACE assessments levied on residential properties in 34 California counties as part of Renovate America’s HERO Program. The initial PACE assessments have an average balance of approximately $21,310, a weighted annual interest rate of 7.93 percent and a weighted average original term of 14.56 years. The initial PACE assessments were originated between May 3 and Aug. 12, 2016.

The HERO securitizations by Renovate have seen significant interest in the green bond market because the proceeds have already been invested in home energy and efficiency improvements projects whose environmental impact is verified. Many other green bonds are for projects that have not yet been realized, and potentially might not be. The HERO Bond platform is the first asset-backed securities (ABS) platform to solely produce green bonds, with each of the company’s eight securitizations having been designated as green by Sustainalytics, an investment research firm specializing in environmental, social and governance (ESG) research and analysis. HERO bonds also adhere to the Green Bond Principles, a set of commonly agreed-upon standards in the capital markets on what constitutes a green bond.

Renovate America CEO J.P. McNeill observed:

“As investor appetite for green bonds increases worldwide, we’re proud to offer a product that not only meets buyers’ discerning standards, but that also provides tangible benefits to society and the planet. The platform we’ve created is bringing private money from around the world to invest in critical infrastructure improvements that reduce water and energy consumption, avoid greenhouse gases, boost the local economy and create clean energy jobs.”

Renovate America SVP for Capital Markets Adam Garfinkle noted: “International demand for our bonds has grown substantially, with investors from Europe joining this most recent transaction – expanding interest in the HERO platform beyond North America and Asia.”

According to Renovate America, the firm partners with local governments to provide the HERO Program to homeowners who finance a wide variety of product installations to conserve water and energy, or to generate renewable energy. These installations include energy-efficient products like HVAC, windows, and roofing; renewable and alternative products like solar; and water efficiency products for indoor systems and outdoor landscaping.

Per the company, since December 2011, the HERO Program has financed more than $1.83 billion of improvements in more than 75,000 homes throughout California. It is currently available to 88% of California households, and just last week launched in Missouri.