Why SolarCity Received an Investment Grade Rating

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SolarCity Corp. (NASDAQ: SCTY) was rising early on Friday on news of its first investment grade credit rating for solar loans. The company completed its first securitization of distributed solar loan assets earlier in the day, the company’s fifth securitization transaction to date.

SolarCity completed a private placement in the amount of $185 million — $2.89 per watt of generation capacity in the portfolio — with a blended coupon interest rate of 5.17% and a blended yield rate of 5.81%. The anticipated repayment date is March 2022.

Credit Suisse acted as the sole structuring agent and sole book runner for the transaction.

According to SolarCity release:

The Class A Notes for SolarCity’s pool of solar loan contracts received an investment grade rating of BBB from Standard & Poor’s and Kroll Bond Rating Agency. The rating reflects the predictability and quality of the cash flows and the minimal operation and production risk of solar assets. With this transaction, solar loan assets were able to achieve an investment grade rating in the asset-backed securities markets for the first time.

So far in 2016, SolarCity has underperformed the market, with the stock down over 37%. Over the past 52 weeks, this number is just a little better with shares down 34%.

Shares of SolarCity closed Thursday down 6.1% at $31.77, with a consensus analyst price target of $68.88 and a 52-week trading range of $24.07 to $63.79. Following the release, the stock shot up just below 6% at $33.50 in early trading indications Friday.