KBRA ABS SolarCity LMC Series IV LLC Series 2015-1 New Issue Report
KBRA ABS SolarCity LMC Series IV LLC Series 2015-1 New Issue Report
KBRA ABS SolarCity LMC Series IV LLC Series 2015-1 New Issue Report
Structured Finance
ABS New Issue Report
Analytical Contacts:
Cecil Smart, Jr., Senior Director
csmart@kbra.com, (646) 731-2381
Table of Contents
Executive Summary ..................................................................................................................... 3
Key Credit Considerations .......................................................................................................... 4
Transaction Overview ................................................................................................................... 8
ABS Structure .......................................................................................................................... 8
Tax Equity Structure ................................................................................................................. 8
Originator and Manager Review ................................................................................................... 11
Management .......................................................................................................................... 11
Customer Acquisition & Development............................................................................................ 13
Underwriting .......................................................................................................................... 13
Site Audit .............................................................................................................................. 14
Engineering Design ................................................................................................................. 14
Contract Verification ................................................................................................................ 14
Installation ............................................................................................................................ 14
Monitoring & Maintenance ........................................................................................................ 15
Collections Policy .................................................................................................................... 15
Contract Reassignments .......................................................................................................... 16
Production Estimate ................................................................................................................... 18
KBRA Production Estimate ........................................................................................................ 18
Operations & Maintenance........................................................................................................... 27
Cash Flow Assumptions .............................................................................................................. 29
Base Case Scenario ................................................................................................................. 29
KBRA Stress Scenarios ............................................................................................................ 30
Transaction Structure ................................................................................................................. 33
Page 2
Executive Summary
This new issue report is based on information regarding the underlying solar equipment, power purchase
agreements, leases, insurance policy and the terms of the securitization as of July 22, 2015. This report
does not constitute a recommendation to buy, hold, or sell securities. Kroll Bond Rating Agencys (KBRA)
rating represents timely payment of interest and full payment of principal by the transactions legal final
maturity date.
Rated Notes
Class
Initial Amount
($)
Interest
Rate (%)
Anticipated
Repayment Date
Final Maturity
Date
KBRA
Rating
A Notes
103,500,000
4.18%
A (sf)
B Notes
20,000,000
5.58%
BBB (sf)
Total
123,500,000
The total aggregate solar discounted asset balance (ASDAB), consisting of the discounted payments of
the leases and power purchase agreements (PPA), is approximately $214.1 million. The securitization
share of the ADSAB is approximately $182.0 million. The portfolio consists of approximately 55.9% PPA
agreements and 44.1% lease agreements by ASDAB and approximately 55.3% PPA agreements and
44.7% lease agreements by number. The original tenor of each agreement is 20 years and the weighted
average remaining term of the agreements is 230.4 months. The weighted average FICO of the underlying
customers of the photovoltaic systems (PV Systems) is 742.
KBRA analyzed the transaction using the General Rating Methodology for Asset-Backed Securities
published on July 30, 2012. In applying the methodology, KBRA analyzed the historical data associated
with solar lease and PPA collections, asset performance and the legal framework of the various tax equity
structures and insurance policy. The capital structure was tested by applying stressed assumptions in
KBRAs cash flow analysis of the transaction.
Transaction Parties
Issuer
Depositor
Originator / Manager
Custodian /
Indenture Trustee /
Transition Manager
Financing Funds
Managing Members
Page 3
For
For
For
For
Page 4
Excess cash flow: The transaction features significant excess cash flow, which
results from the difference between the discounted cash flows expected from the
aggregate distributions to the respective Managing Members and the weighted
average interest rate on the Notes.
+/
KBRA views the mechanism for deferral of some portion of interest on the Class B Notes as a
credit positive for the Class A Notes as these amounts are paid after principal payments on
the Class A Notes. However, KBRA views this feature as a credit negative for the Class B
Notes as a portion of the expected interest to the Class B Notes may become more deeply
subordinated. In KBRAs cash flow analysis, principal and ultimate interest of the Class B
Notes is fully repaid under all stress scenarios.
Transaction Structure Tax Loss Insurance Policies to Cover Tax Basis
Adjustments
The PV Systems were financed via tax partnerships (i.e. the Financing Funds) between
a Managing Member and the related Tax Equity Investor. Each Financing Fund holds
the right to an investment tax credit (ITC) in an amount that is based on the fair
market value (FMV) of the related PV Systems at the time of purchase. The related
Tax Equity Investor retains a substantial interest in the Financing Fund, which entitles
it to 99% of the ITCs, until the flip date, which occurs on the later of a specified date
or once the Tax Equity Investor realizes a specified rate of return.
In the event the IRS subsequently determines the fair market value of the PV Systems
relating to any Financing Fund is lower than what was claimed, SolarCity has agreed
to pay the related Financing Fund the amount of any tax loss payable by the Managing
Member and Tax Equity Investor. In the event SolarCity is unable to fulfill this
reimbursement obligation, the Issuer will have the benefit of a Tax Loss Insurance
Policy for each Financing Fund, with the Indenture Trustee named as a loss payee, to
cover tax loss payments to the Tax Equity Investor up to 35% (inclusive of the
associated deductible) of the ITCs claimed by the Financing Fund with respect to the
PV Systems and fees and expenses (Contest Costs) incurred by the Financing Fund
related to its defense or appeal against such claim.
+/-
The insurers will be Underwriters at Lloyds, London and Columbia Casualty Company.
KBRA has performed credit estimates of these two insurers and does not view their
SolarCity LMC Series IV, LLC,
Series 2015-1
Page 5
Further, residential solar systems are a relatively new asset class and the business
model for solar developers continues to evolve. As such, only limited performance
data is available for this sector. As a proxy, KBRA employed elements of its RMBS
methodologies to forecast payment defaults.
Page 6
Geographical Concentration
California residents represent approximately 46.3% by number of obligors on the
underlying PV Systems in the transaction and the top three states (CA, AZ, CO)
account for approximately 70.4% of obligors.
KBRA believes that geographic
concentration for the subject transaction is significant as the top three states (CA, AZ,
CO) account for 76.5% of the portfolio by ASDAB. Transactions with greater
geographic diversity are better insulated from regional home price decline relative to
pools with higher geographic concentration. A regional downturn may result in
increased defaults and reduced cash flow.
Page 7
Transaction Overview
ABS Structure
The transaction is secured by the equity interests of the managing members (Managing Members) in
the related Financing Funds that in the aggregate own a portfolio of 16,400 leases and PPAs associated
with residential solar photovoltaic installations (PV Systems) and any proceeds received from draws
under any tax loss insurance policy (Tax Loss Insurance Policy) supporting the transaction. Portfolio
cash flow shall include payments from the underlying customers of the PV Systems and any payments due
from a utility or federal, state or local government authority under a performance based incentive (PBI)
program. However, the cash flow shall be net of operations and maintenance (O&M) expenses,
administrative and insurance expenses and any distributions to a tax equity investor (Tax Equity
Investor) per the contractual schedule for the respective Financing Fund.
The transaction is structured such that interest is paid sequentially on the Class A Notes and then the
Class B Notes (together with the Class A Notes, the Notes) and then principal is paid sequentially on the
Notes. If the DSCR drops below 1.00 for any determination date, interest on the Class B Notes will be
deferred and subordinated to principal payments due to the Class A Notes and will remain in effect until
the DSCR again rises above 1.00.
To the extent the aggregate principal balance of the Notes is unpaid after the anticipated repayment date
(ARD), additional interest (step-up interest) will accrue on the Notes at 5.0% per annum. Post-ARD
step-up interest is subordinated to the interest calculated at the rate as of the closing date for the
transaction and any principal payments due on the Notes. Moreover, any unpaid post-ARD step-up
interest in any collection period is not capitalized. KBRAs rating does not cover the payment of post-ARD
step-up interest.
The transaction benefits from credit enhancement in the form of overcollateralization, excess spread, an
interest reserve account, a supplemental reserve account and, in the case of the Class A Notes,
subordination. Proceeds deposited in the supplemental reserve account will be used to fund replacement
of active inverters in the portfolio, the purchase option associated with the respective Financing Funds and
the respective deductibles of the Tax Loss Insurance Policies.
The appraisal
Income method (discounted cash flows of the net cash and tax benefits to the system owner)
Page 8
The purchase price of the PV Systems is the appraised FMV at the time it was sold to the Financing Fund.
The aggregate appraised FMV for the Financing Funds is $544.3 million.
Partnership Flip
PPA and lease payments, PBI payments and monetized SRECs less O&M, administrative and insurance
expenses (Distributable Cash) are distributed in accordance with a contractual schedule for the
respective Financing Fund. Each Tax Equity Investor receives a priority return. The Tax Equity Investor in
Visigoth Solar I, LLC receives a pro rata return. Priority distributions to the Tax Equity Investors are
usually a preferred return based on each Tax Equity Investors capital contribution. Pro rata distributions
are based on a contractual fixed percentage of Distributable Cash set forth in the partnership agreement.
When a Tax Equity Investor reaches a contractual IRR, its partnership interest reduces or flips. After the
flip the Managing Member has a call option to purchase all of the Tax Equity Investors partnership interest
in the Financing Fund after the flip date has occurred, except in the case of Visigoth Solar I, LLC a
specified date prior to a flip date. The timing of the purchase is either within 90 days after the projected
flip date or within six months after the actual flip date.
The option price is the generally the greater of:
the FMV of the Tax Equity Investors 99% interest at the time of the purchase; and
the amount of cash SolarCity would have to distribute to the Tax Equity Investor for it to reach the
buyout IRR.
The FMV is determined by an agreement between the Managing Member and Tax Equity Investor or by a
third-party appraisal.
Financing Fund
Solar Integrated I Fund, LLC
Blue Skies Solar I, LLC
Visigoth Solar I, LLC
Solar Integrated II Fund, LLC
ITCs assigned to the respective Financing Funds are subject to a five-year compliance period. Recapture
of the ITCs is triggered if:
To avoid ITC recapture, the members of the partnership must retain ownership of the PV Systems for the
five-year period following the year the system is placed in service.
Page 9
Following the audit the IRS may formally challenge the FMV calculation. The IRS must submit its
challenge within 3 years following the filing of a Tax Equity Investors tax return. If a challenge is made
during this period, the statute of limitations tolls until a decision is made regarding the challenge. The
minimum expected duration of an ITC challenge until resolution is approximately four years. Cash flow
received by the Issuer from payments under the lease and PPA agreements would still be available to
service interest and principal payments on the Notes during an IRS challenge.
To the extent an IRS challenge results in an adjustment in the FMV, the Financing Fund will have to repay
30 for every $1 reduction in the FMV. To mitigate against any reduction in the distributions to the
Managing Members associated with potential IRS recapture of ITCs, at closing the Issuer will purchase a
Tax Loss Insurance Policy for each Financing Fund with the Indenture Trustee named as loss payee under
the policy. The policy premiums will be paid at closing with proceeds from the transaction. If a policy
payment is required under a Tax Loss Insurance Policy, the associated deductible will be paid by the
Issuer via proceeds deposited in the supplemental reserve account. The aggregate deductibles of the Tax
Loss Insurance Policies will be funded on each Payment Date via deposits to the supplemental reserve
account.
The maximum protection provided by each Tax Loss Insurance Policy represents 35% (inclusive of the
associated deductible) of the ITCs claimed by each Financing Fund. After a review of SolarCitys value
chain and the associated cost per kilowatt to manufacture a PV System, KBRA concluded that the potential
sum of tax loss payments and Contest Costs equal to 35% of the ITCs claimed is an appropriate A level
stress to the FMV.
Underwriters at Lloyds, London and Columbia Casualty Company will provide coverage for all of the Tax
Loss Insurance Policies. The coverage provided by the insurance providers will be split 62.5%/37.5%,
respectively. KBRA performed a credit assessment of the insurance providers and currently does not view
the providers as a constraint on the proposed ratings of the Notes. However, the transaction does not
provide for a replacement mechanism or any structural protections in the event one or both of the
insurance providers are downgraded.
Page 10
Management
KBRA has met with management and believes the team has the knowledge and industry experience to
service the securitized pool.
Lyndon Rive, Chief Executive Officer
Mr. Rive co-founded SolarCity in 2006 and is responsible for the overall direction of the Company. Mr.
Rive has led the Companys efforts to raise sufficient funds to finance more than $4 billion on solar
projects from a range of investors. He has also helped the Company enter a range of new markets to
serve more than 300 schools and universities, more than 100 regional and national homebuilders and
major organizations. Mr. Rive co-founded Everdream, an industry leader in software services for large
scale, distributed computer management. He negotiated Everdreams partnership with Dell Computer,
which acquired the company in 2007.
Peter Rive, Chief Technology Officer
Mr. Rive is SolarCitys co-founder and Chief Technology Officer, overseeing the Companys development of
next generation software and hardware technologies, including battery systems and solar mounting
hardware. Mr. Rive has held several senior technology positions throughout his career focused on
streamlining operational activities through the use of advanced software. Prior to co-founding SolarCity,
Mr. Rive was the chief technology officer at Everdream, where he designed a software platform to
centralize computer management. Everdream was acquired by Dell in 2007.
Hayes Barnard, Chief Revenue Officer
As Chief Revenue Officer, Mr. Barnard focuses on the ways in which consumers, businesses and
government organizations can switch to cleaner energy at a lower cost, through a range of integrated
solutions. Prior to joining SolarCity, Hayes was the chairman and CEO of Paramount Equity, a consumer
finance company specializing in mortgage, insurance, and residential solar. By mid-year 2013, Paramount
Equity had funded more than $12 billion in consumer financing, and helped over 55,000 families achieve
greater savings since 2003. Mr. Barnard serves on the board of directors of Paramount G|R Holdings, LLC
and also serves as President of the GivePower Foundation, SolarCitys initiative to provide light via
renewable energy to schools that lack access to electricity. Mr. Barnard holds a bachelors degree in
business management and marketing from the University of Missouri.
SolarCity LMC Series IV, LLC,
Series 2015-1
Page 11
Page 12
Underwriting
SolarCitys general underwriting criteria require a minimum FICO of 650 for a prospective customer.
However, the specific credit underwriting policy with respect to the Financing Funds required that a
customer met the following conditions:
Page 13
Site Audit
Site auditors based at each of SolarCitys regional operating centers visit each site to verify assumptions
made by the salesperson when generating a proposal. An audit involves verification of the following:
Key dimensions and measurements (to make corrections to the initial 3D model, which is created
based on multi-view aerial photography);
Obstructions and shading;
Characteristics of the mounting plane(s) (roof surface, protrusions, etc.);
Structural characteristics (including an attic entry to verify rafter size, spacing, truss design);
Electrical characteristics (service panel location/age/rating, code compliance); and
Safety hazards.
Auditors record information in EdLite, an internet-enabled tablet computer. The auditor executes a photo
checklist so that attributes of the mounting plane, structure, obstructions, and electrical system are
documented visually.
Engineering Design
Following the site audit, the engineering design team performs a series of technical checks on the design
and finalizes drawings and the bill of materials. These checks include finalizing equipment selection,
module placement, and racking layout. Basic structural and electrical engineering checks are integrated
into the ED and are performed on every design.
The Sponsors staff includes licensed professional civil and electrical engineers who can manually verify
those PV systems which require more complex calculations and can also certify drawings for certain
jurisdictions if required.
Contract Verification
A dedicated contract verification team compares the final design to the assumptions in the executed
customer contract. If a material change to the design has occurred, then a customer contract amendment
is executed. Common reasons for amendments include changes in assumed shade or sun exposure;
changes to module layout; and accommodation of customer requests. An amendment will be executed if
the forecasted electrical output varies by more than 20% or more for non-full prepay PPAs or by more
than 10% or more for leases, relative to the original estimate.
Installation
Installation is performed by a team of 2-3 persons. SolarCity obtained all necessary building permits prior
to installation. The Company is a licensed contractor or uses licensed subcontractors in every community
it services and is responsible for every customer installation. For substantially all of its residential
projects, SolarCity is the general contractor, construction manager and installer. To assist installers while
onsite, the Company also provides a technical support hotline, which installers may call to obtain real-time
advice to remedy installation issues. As of May 2014 less than 5% of SolarCitys residential installations
were installed by subcontractors.
Page 14
Collections Policy
SolarCity has implemented the following collections policy with respect to lease agreements and PPAs. This
policy was designed to identify payment problems early enough to address delinquencies quickly and,
when necessary, remove, redeploy and reassign solar energy systems to preserve the value of solar
energy systems:
Day 1:
Day 10:
Day 15:
Day 31:
Day 61:
Contact customer again to inquire about late payment and advise that SolarCity will
turn off his/her system on Day 70 if payment is not received.
Day 65:
Day 65:
Day 65:
Contact customer to inform him/her that SolarCity will shut down system within the
next five days.
Day 69:
Day 70:
Commence the process to shut down system. Send note to customer that the
system has been turned off and if he/she does not bring their account current within
20 days, SolarCity will invoice the customer for all amounts outstanding, including
penalty payments in the agreement, and suspend performance under the contract
until receipt of such payments.
Day 90:
Following system shut down, customers have the option to pay the entire outstanding balance to have the
system turned on again.
Below are SolarCitys receivables aging data from January 2014 through April 2015.
Page 15
Contract Reassignments
SolarCity has the right to remove PV Systems upon default or failure of the customer to pay all amounts
outstanding and costs incurred. System removals are extremely rare and account for a small percentage
of the Companys portfolio. The redeployment process of systems is managed by SolarCitys asset
management group (AMG).
Generally, contract reassignments are the result of customer financial distress (short sale, foreclosure,
divorce, death of the customer, or sale of the home). In cases of death and divorce the agreement is
reassigned to surviving spouse or heir, where the system is installed. In other cases, AMG attempts to
redeploy a system by offering it at a discount to a prospective customer who has similar energy and
engineering requirements to the repossessed system.
Page 16
Foreclosure, 1.1%
Other, 0.3%
Normal Sale,
91.1%
Reassignment Resolution
Discounted,
2.3%
Full Prepay,
2.8%
Partial Prepay,
0.9%
Other, 0.2%
Title Transfer,
2.8%
Normal
Transfer, 91.0%
Page 17
Standard Transfer
Discounted Transfer
Total
# of Completed
Reassignments
% of
Completed
Reassignments
3,950
97.7%
$49,572,462
$49,572,462
($1,539)
92
2.3%
$2,098,485
$2,098,485
$599,121
71.4%
4,042
100.0%
$51,670,947
$51,670,947
$597,582
98.8%
PV of Contract
PV of
Amount of
Cash Flows
Contract Cash
Loss / (Gain)
(Before)
Flows (After)
Recovery
100.0%
Production Estimate
The amount of energy output from a solar system is dependent upon the solar resource. SolarCity
engaged DNV GL (Independent Engineer or IE) to evaluate its solar resource assessment that is a
primary input into its pro forma forecast. The solar resource assessment is based on using the PVWatts
forecasting engine, developed by the National Renewable Energy Laboratory. The data used by the
PVWatts forecasting engine are derived from the 1961 1990 National Solar Radiation Database and
include solar radiation and other meteorological elements for one year intended to represent typical
conditions over a long period of time. Given the background of these data, the IE considers the
uncertainty of SolarCitys solar radiation data to be higher than a well calibrated ground measurement
station or newer satellite based measurements. However, per the IE the lack of accuracy for a given
home is reduced for a particular portfolio depending on the large number of PV Systems being
aggregated.
The IE evaluated the PV Systems financed by the Financing Funds. The production data obtained by the
IE was then compared to SolarCitys original forecast, which is consistent with a P50 generation profile.
P50 production is the median expected production of a PV System. Based on the IEs findings, the
average production of the portfolio of PV Systems was 103% of the Companys P50 production estimate.
The standard deviation of the production data is 10.7%. Approximately 17% of the portfolio produced at
levels that are less than 95% of the Companys P50 production estimate, which accounts for the large
dispersion of the production data and suggests performance may vary greatly from one PV System to the
next.
Page 18
1
102.9%
101.6%
94.2%
100.3%
100.5%
95.2%
93.3%
99.1%
97.4%
98.4%
99.4%
96.9%
104.4%
97.4%
Year
11
AZ
96.7%
CA
95.5%
CO
88.6%
CT
94.3%
DC
94.5%
DE
89.5%
HI
87.7%
MA
93.2%
MD
91.6%
NJ
92.5%
NV
93.4%
NY
91.1%
OR
98.1%
TX
91.6%
* Source: DNV GL
9
98.1%
96.8%
89.8%
95.6%
95.8%
90.8%
88.9%
94.5%
92.9%
93.7%
94.7%
92.4%
99.5%
92.9%
10
97.5%
96.2%
89.2%
95.0%
95.2%
90.2%
88.4%
93.9%
92.3%
93.2%
94.1%
91.8%
98.9%
92.3%
12
94.7%
93.5%
86.7%
92.3%
92.5%
87.6%
85.8%
91.2%
89.7%
90.5%
91.5%
89.2%
96.0%
89.7%
19
92.3%
91.1%
84.5%
90.0%
90.2%
85.5%
83.7%
88.9%
87.4%
88.3%
89.2%
87.0%
93.7%
87.4%
20
91.8%
90.6%
84.0%
89.5%
89.7%
84.9%
83.2%
88.4%
86.9%
87.7%
88.6%
86.5%
93.1%
86.9%
13
93.5%
92.3%
85.6%
91.1%
91.3%
86.5%
84.7%
90.0%
88.5%
89.4%
90.3%
88.1%
94.8%
88.5%
14
93.6%
92.3%
85.7%
91.2%
91.4%
86.6%
84.8%
90.1%
88.6%
89.4%
90.4%
88.1%
94.9%
88.6%
15
94.0%
92.7%
86.0%
91.6%
91.8%
86.9%
85.2%
90.5%
89.0%
89.8%
90.7%
88.5%
95.3%
89.0%
16
93.9%
92.6%
85.9%
91.5%
91.7%
86.9%
85.1%
90.4%
88.9%
89.7%
90.7%
88.4%
95.2%
88.9%
Page 19
17
93.5%
92.2%
85.6%
91.1%
91.3%
86.5%
84.7%
90.0%
88.5%
89.3%
90.3%
88.0%
94.8%
88.5%
18
92.9%
91.7%
85.0%
90.6%
90.8%
86.0%
84.2%
89.5%
88.0%
88.8%
89.7%
87.5%
94.2%
88.0%
Year
AZ
CA
CO
CT
DC
DE
HI
MA
MD
NJ
NY
OR
PA
TX
1
104.8%
103.8%
93.9%
101.0%
100.5%
98.7%
94.1%
100.5%
98.3%
98.4%
98.4%
103.2%
98.2%
100.1%
Year
11
AZ
98.5%
CA
97.6%
CO
88.3%
CT
95.0%
DC
94.5%
DE
92.8%
HI
88.4%
MA
94.5%
MD
92.4%
NJ
92.5%
NY
92.5%
OR
97.0%
PA
92.3%
TX
94.1%
* Source: DNV GL
13
95.2%
94.3%
85.3%
91.8%
91.3%
89.7%
85.5%
91.3%
89.3%
89.4%
89.4%
93.8%
89.2%
91.0%
14
95.3%
94.4%
85.4%
91.9%
91.4%
89.8%
85.5%
91.4%
89.4%
89.5%
89.4%
93.8%
89.3%
91.0%
16
95.6%
94.7%
85.7%
92.2%
91.7%
90.1%
85.8%
91.7%
89.7%
89.7%
89.7%
94.1%
89.6%
91.3%
Page 20
17
95.2%
94.3%
85.3%
91.8%
91.3%
89.7%
85.4%
91.3%
89.3%
89.3%
89.3%
93.7%
89.2%
90.9%
18
94.6%
93.7%
84.8%
91.2%
90.8%
89.1%
84.9%
90.7%
88.7%
88.8%
88.8%
93.2%
88.7%
90.4%
9
99.9%
98.9%
89.5%
96.3%
95.8%
94.1%
89.7%
95.8%
93.7%
93.8%
93.8%
98.4%
93.6%
95.4%
10
99.3%
98.3%
89.0%
95.7%
95.2%
93.5%
89.1%
95.2%
93.1%
93.2%
93.2%
97.8%
93.0%
94.8%
19
94.0%
93.1%
84.3%
90.7%
90.2%
88.6%
84.4%
90.2%
88.2%
88.3%
88.3%
92.6%
88.1%
89.8%
20
93.5%
92.6%
83.8%
90.1%
89.7%
88.1%
83.9%
89.7%
87.7%
87.8%
87.7%
92.1%
87.6%
89.3%
Year
AZ
CA
CO
CT
DC
DE
MA
MD
NJ
NY
OR
PA
TX
1
105.0%
103.7%
95.8%
100.6%
100.5%
97.7%
100.9%
98.2%
99.0%
98.4%
104.4%
98.2%
100.4%
Year
11
AZ
98.7%
CA
97.4%
CO
90.1%
CT
94.6%
DC
94.5%
DE
91.9%
MA
94.8%
MD
92.4%
NJ
93.1%
NY
92.5%
OR
98.1%
PA
92.3%
TX
94.4%
* Source: DNV GL
9
100.1%
98.8%
91.3%
95.9%
95.8%
93.1%
96.1%
93.6%
94.4%
93.8%
99.5%
93.6%
95.7%
10
99.5%
98.2%
90.8%
95.3%
95.2%
92.6%
95.6%
93.1%
93.8%
93.2%
98.9%
93.0%
95.1%
12
96.6%
95.4%
88.2%
92.6%
92.5%
89.9%
92.8%
90.4%
91.1%
90.5%
96.0%
90.4%
92.4%
19
94.2%
93.0%
86.0%
90.3%
90.2%
87.7%
90.5%
88.2%
88.8%
88.3%
93.7%
88.1%
90.1%
20
93.7%
92.5%
85.5%
89.7%
89.7%
87.2%
90.0%
87.6%
88.3%
87.8%
93.1%
87.6%
89.6%
13
95.4%
94.2%
87.1%
91.4%
91.3%
88.8%
91.6%
89.3%
89.9%
89.4%
94.8%
89.2%
91.2%
14
95.5%
94.2%
87.1%
91.5%
91.4%
88.8%
91.7%
89.3%
90.0%
89.5%
94.9%
89.3%
91.3%
15
95.9%
94.6%
87.5%
91.9%
91.8%
89.2%
92.1%
89.7%
90.4%
89.8%
95.3%
89.7%
91.7%
16
95.8%
94.5%
87.4%
91.8%
91.7%
89.1%
92.0%
89.6%
90.3%
89.7%
95.2%
89.6%
91.6%
Page 21
17
95.4%
94.1%
87.0%
91.4%
91.3%
88.7%
91.6%
89.2%
89.9%
89.4%
94.8%
89.2%
91.2%
18
94.8%
93.6%
86.5%
90.8%
90.8%
88.2%
91.1%
88.7%
89.4%
88.8%
94.2%
88.7%
90.7%
Year
AZ
CA
CO
CT
DC
DE
MA
MD
NJ
NV
NY
OR
TX
1
102.2%
101.2%
93.8%
100.3%
100.5%
95.2%
98.2%
97.3%
98.4%
101.0%
96.0%
104.4%
96.7%
Year
11
AZ
96.1%
CA
95.1%
CO
88.2%
CT
94.3%
DC
94.5%
DE
89.5%
MA
92.3%
MD
91.4%
NJ
92.5%
NV
95.0%
NY
90.3%
OR
98.1%
TX
90.9%
* Source: DNV GL
Solar Integrated
2
3
101.6% 101.0%
100.6% 100.0%
93.2%
92.7%
99.7%
99.1%
99.9%
99.3%
94.7%
94.1%
97.6%
97.0%
96.7%
96.1%
97.8%
97.2%
100.4%
99.8%
95.4%
94.9%
103.7% 103.1%
96.1%
95.5%
12
94.0%
93.1%
86.3%
92.3%
92.5%
87.6%
90.4%
89.5%
90.6%
93.0%
88.4%
96.0%
88.9%
13
92.8%
92.0%
85.2%
91.2%
91.3%
86.5%
89.2%
88.4%
89.4%
91.8%
87.2%
94.8%
87.8%
15
93.3%
92.4%
85.7%
91.6%
91.8%
86.9%
89.7%
88.8%
89.8%
92.2%
87.7%
95.3%
88.2%
16
93.2%
92.3%
85.6%
91.5%
91.7%
86.9%
89.6%
88.7%
89.8%
92.1%
87.6%
95.2%
88.2%
Page 22
17
92.8%
91.9%
85.2%
91.1%
91.3%
86.5%
89.2%
88.3%
89.4%
91.7%
87.2%
94.8%
87.8%
Year*
8
98.0%
97.0%
89.9%
96.2%
96.4%
91.3%
94.1%
93.2%
94.3%
96.8%
92.1%
100.1%
92.7%
9
97.4%
96.5%
89.4%
95.6%
95.8%
90.8%
93.6%
92.7%
93.8%
96.3%
91.5%
99.5%
92.1%
10
96.8%
95.9%
88.9%
95.1%
95.2%
90.2%
93.0%
92.1%
93.2%
95.7%
91.0%
98.9%
91.6%
18
92.2%
91.4%
84.7%
90.6%
90.8%
86.0%
88.6%
87.8%
88.8%
91.2%
86.7%
94.2%
87.3%
19
91.7%
90.8%
84.2%
90.0%
90.2%
85.5%
88.1%
87.3%
88.3%
90.6%
86.2%
93.7%
86.7%
20
91.1%
90.3%
83.7%
89.5%
89.7%
84.9%
87.6%
86.7%
87.8%
90.1%
85.6%
93.1%
86.2%
1
98.4%
96.4%
89.3%
93.0%
91.4%
84.9%
87.1%
91.4%
90.5%
90.6%
88.2%
89.1%
98.9%
90.4%
Year
11
AZ
87.1%
CA
85.3%
CO
79.0%
CT
82.3%
DC
80.9%
DE
75.2%
HI
77.1%
MA
80.9%
MD
80.0%
NJ
80.2%
NV
78.0%
NY
78.9%
OR
87.5%
TX
80.0%
* Source: DNV GL
9
89.4%
87.6%
81.1%
84.5%
83.0%
77.1%
79.1%
83.0%
82.1%
82.3%
80.1%
80.9%
89.8%
82.1%
10
88.3%
86.5%
80.1%
83.4%
82.0%
76.2%
78.2%
82.0%
81.2%
81.3%
79.1%
80.0%
88.7%
81.1%
12
84.7%
83.0%
76.9%
80.1%
78.7%
73.1%
75.0%
78.7%
77.9%
78.0%
75.9%
76.7%
85.1%
77.9%
15
82.6%
80.9%
74.9%
78.0%
76.7%
71.3%
73.1%
76.7%
75.9%
76.0%
74.0%
74.8%
82.9%
75.9%
19
79.2%
77.6%
71.9%
74.9%
73.6%
68.4%
70.1%
73.6%
72.8%
72.9%
71.0%
71.7%
79.6%
72.8%
20
78.2%
76.7%
71.0%
74.0%
72.7%
67.5%
69.3%
72.7%
71.9%
72.0%
70.1%
70.9%
78.6%
71.9%
13
83.1%
81.5%
75.5%
78.6%
77.3%
71.8%
73.6%
77.2%
76.4%
76.6%
74.5%
75.3%
83.5%
76.4%
14
82.7%
81.1%
75.1%
78.2%
76.9%
71.4%
73.2%
76.8%
76.0%
76.2%
74.1%
74.9%
83.1%
76.0%
16
82.0%
80.3%
74.4%
77.5%
76.2%
70.8%
72.6%
76.2%
75.4%
75.5%
73.4%
74.2%
82.4%
75.3%
Page 23
17
81.1%
79.5%
73.6%
76.7%
75.4%
70.0%
71.8%
75.4%
74.6%
74.7%
72.7%
73.5%
81.5%
74.6%
18
80.2%
78.5%
72.8%
75.8%
74.5%
69.2%
71.0%
74.5%
73.7%
73.8%
71.8%
72.6%
80.5%
73.7%
Year
AZ
CA
CO
CT
DC
DE
HI
MA
MD
NJ
NY
OR
PA
TX
1
101.3%
99.7%
90.8%
93.9%
90.6%
88.2%
88.1%
93.0%
92.1%
90.7%
90.7%
98.1%
89.2%
94.1%
Year
11
AZ
89.7%
CA
88.2%
CO
80.3%
CT
83.0%
DC
80.2%
DE
78.1%
HI
77.9%
MA
82.3%
MD
81.5%
NJ
80.2%
NY
80.3%
OR
86.8%
PA
79.0%
TX
83.3%
* Source: DNV GL
13
85.6%
84.2%
76.7%
79.3%
76.6%
74.5%
74.4%
78.5%
77.8%
76.6%
76.7%
82.9%
75.4%
79.5%
14
85.2%
83.8%
76.3%
78.9%
76.2%
74.1%
74.0%
78.1%
77.4%
76.2%
76.3%
82.4%
75.0%
79.1%
16
84.4%
83.0%
75.6%
78.2%
75.5%
73.5%
73.4%
77.4%
76.7%
75.5%
75.6%
81.7%
74.3%
78.4%
Page 24
17
83.5%
82.2%
74.8%
77.4%
74.7%
72.7%
72.6%
76.6%
75.9%
74.7%
74.8%
80.9%
73.6%
77.6%
18
82.5%
81.2%
73.9%
76.4%
73.8%
71.9%
71.7%
75.7%
75.0%
73.8%
73.9%
79.9%
72.7%
76.6%
9
92.0%
90.5%
82.4%
85.2%
82.3%
80.1%
80.0%
84.4%
83.6%
82.3%
82.4%
89.0%
81.0%
85.4%
10
90.9%
89.4%
81.4%
84.2%
81.3%
79.1%
79.0%
83.4%
82.6%
81.3%
81.4%
88.0%
80.1%
84.4%
19
81.5%
80.2%
73.0%
75.5%
72.9%
71.0%
70.9%
74.8%
74.1%
72.9%
73.0%
78.9%
71.8%
75.7%
20
80.6%
79.3%
72.2%
74.6%
72.0%
70.1%
70.0%
73.9%
73.2%
72.1%
72.1%
78.0%
71.0%
74.8%
Year
AZ
CA
CO
CT
DC
DE
MA
MD
NJ
NY
OR
PA
TX
1
101.3%
99.3%
91.6%
93.3%
88.5%
87.7%
93.5%
91.6%
91.3%
90.7%
98.9%
85.4%
94.1%
Year
11
AZ
89.6%
CA
87.8%
CO
81.0%
CT
82.6%
DC
78.3%
DE
77.6%
MA
82.7%
MD
81.1%
NJ
80.8%
NY
80.2%
OR
87.5%
PA
75.6%
TX
83.3%
* Source: DNV GL
9
92.0%
90.1%
83.2%
84.7%
80.3%
79.6%
84.9%
83.2%
82.9%
82.3%
89.8%
77.5%
85.5%
10
90.9%
89.1%
82.2%
83.7%
79.4%
78.7%
83.9%
82.2%
81.9%
81.4%
88.7%
76.6%
84.4%
12
87.2%
85.5%
78.9%
80.3%
76.2%
75.5%
80.5%
78.9%
78.6%
78.1%
85.2%
73.5%
81.0%
19
81.5%
79.9%
73.7%
75.1%
71.2%
70.6%
75.2%
73.7%
73.5%
73.0%
79.6%
68.7%
75.7%
20
80.5%
78.9%
72.8%
74.2%
70.3%
69.7%
74.3%
72.8%
72.6%
72.1%
78.6%
67.9%
74.8%
13
85.6%
83.9%
77.4%
78.8%
74.7%
74.1%
79.0%
77.4%
77.1%
76.6%
83.6%
72.1%
79.5%
14
85.1%
83.4%
77.0%
78.4%
74.4%
73.7%
78.6%
77.0%
76.7%
76.2%
83.1%
71.8%
79.1%
15
85.0%
83.3%
76.8%
78.3%
74.2%
73.6%
78.4%
76.9%
76.6%
76.1%
83.0%
71.6%
79.0%
16
84.4%
82.7%
76.3%
77.7%
73.7%
73.1%
77.9%
76.3%
76.0%
75.5%
82.4%
71.1%
78.4%
Page 25
17
83.5%
81.8%
75.5%
76.9%
72.9%
72.3%
77.1%
75.5%
75.3%
74.8%
81.5%
70.4%
77.6%
18
82.5%
80.9%
74.6%
76.0%
72.1%
71.4%
76.2%
74.6%
74.3%
73.9%
80.6%
69.6%
76.7%
Year
AZ
CA
CO
CT
DC
DE
MA
MD
NJ
NV
NY
OR
TX
1
97.5%
96.2%
89.0%
93.0%
92.2%
84.9%
90.4%
90.3%
90.7%
94.8%
88.1%
98.5%
89.4%
Year
11
AZ
86.3%
CA
85.1%
CO
78.7%
CT
82.3%
DC
81.6%
DE
75.1%
MA
80.0%
MD
79.9%
NJ
80.2%
NV
83.9%
NY
78.0%
OR
87.2%
TX
79.1%
* Source: DNV GL
13
82.4%
81.3%
75.2%
78.6%
77.9%
71.7%
76.4%
76.3%
76.6%
80.1%
74.5%
83.2%
75.5%
14
82.0%
80.9%
74.8%
78.2%
77.5%
71.4%
76.0%
75.9%
76.2%
79.7%
74.1%
82.8%
75.1%
15
81.8%
80.7%
74.6%
78.0%
77.4%
71.2%
75.9%
75.8%
76.0%
79.5%
73.9%
82.6%
75.0%
16
81.2%
80.1%
74.1%
77.5%
76.8%
70.7%
75.3%
75.2%
75.5%
79.0%
73.4%
82.1%
74.5%
Page 26
17
80.4%
79.3%
73.3%
76.7%
76.0%
70.0%
74.5%
74.5%
74.7%
78.1%
72.7%
81.2%
73.7%
Year*
8
89.6%
88.4%
81.7%
85.5%
84.7%
78.0%
83.1%
83.0%
83.3%
87.1%
81.0%
90.5%
82.2%
9
88.5%
87.3%
80.8%
84.5%
83.7%
77.1%
82.1%
82.0%
82.3%
86.1%
80.0%
89.4%
81.2%
10
87.5%
86.3%
79.8%
83.4%
82.7%
76.2%
81.1%
81.0%
81.3%
85.0%
79.1%
88.4%
80.2%
18
79.4%
78.4%
72.5%
75.8%
75.1%
69.1%
73.7%
73.6%
73.8%
77.2%
71.8%
80.2%
72.8%
19
78.5%
77.4%
71.6%
74.9%
74.2%
68.3%
72.8%
72.7%
72.9%
76.3%
70.9%
79.3%
72.0%
20
77.5%
76.5%
70.7%
74.0%
73.3%
67.5%
71.9%
71.8%
72.1%
75.4%
70.1%
78.3%
71.1%
Page 27
Summary of Collateral
Portfolio Summary
Total PV Systems
ADSAB ($ millions)
Average ADSAB
Range of ADSAB
Aggregate PV System size (kW DC)
WA PV System Size (kW DC)
Range of PV System Sizes (kw DC)
WA Customer Agreement Initial Term (months)
WA Customer Agreement Remaining Initial Term (months)
WA Customer Agreement Seasoning (months)
Range of Customer Agreement Seasoning (months)
WA Price per kWh
WA Annual Customer Agreement Price per kWh Fee Escalator
Expected PBI Payments (% of ADSAB)
WA FICO Score
Range of FICO Scores
Number of Lease agreements
Number of PPA Agreements
Percentage of PPA agreements (by ADSAB)
Percentage of Lease agreements (by ADSAB)
Fund Data
PV Systems
Aggregate PV System size (MW DC)
Weighted average FICO
ADSAB ($ millions)
Average Discounted Solar Asset Balance
Range of customer agreements - Months remaining
Weighted average customer agreement - Months remaining
State (% of ADSAB)
Arizona
California
Colorado
Connecticut
District of Columbia
Delaware
Hawaii
Massachusetts
Maryland
Nevada
New Jersey
New York
Oregon
Pennsylvania
Texas
16,400
$214.1
$13,054
$(7,680) to $91,954
108,168
6.60
1.47 to 99.96
240
230
8.0
0 to 22
$0.14
2.02%
3.14%
742
558 to 850
9,075
7,325
55.9%
44.1%
Financing
Fund A
3,840
24.6
752
46.0
$11,968
225 to 239
231
Financing
Fund B
3,841
26.3
731
51.0
$13,266
230 to 240
234
Financing
Fund C
1,658
11.1
743
19.3
$11,654
218 to 240
222
Financing
Fund D
7,061
46.2
743
97.9
$13,858
229 to 240
234
17.7%
53.9%
6.4%
3.1%
0.0%
0.5%
0.0%
4.4%
7.4%
0.0%
1.7%
2.0%
1.0%
0.1%
1.8%
17.9%
50.9%
5.6%
3.9%
0.0%
0.7%
0.0%
7.0%
4.8%
0.1%
2.3%
6.0%
0.2%
0.0%
0.6%
15.0%
36.9%
21.6%
3.9%
0.0%
0.5%
3.3%
1.5%
8.1%
0.0%
2.3%
1.7%
2.9%
0.5%
1.8%
13.6%
60.7%
3.3%
4.0%
0.0%
0.5%
0.6%
5.4%
4.5%
0.0%
2.2%
4.0%
0.4%
0.0%
0.7%
Page 28
Under the base case scenario, the Class A Notes are repaid in period 26 (year 13) and the Class B Notes
are repaid in period 28 (year 14). The chart below illustrates KBRAs base case scenario projections.
10
20
30
40
50
60
Period
Class A Notes
Class B Notes
Page 29
Scenario 1: A Stress
Under Scenario 1 the following stresses were applied to the structure:
Page 30
10
20
30
40
50
60
Period
Class A Notes (Base Case)
In Scenario 1, the Class A Notes were repaid in period 35 (year 18) and the Class B Notes were repaid in
period 38 (year 19).
Page 31
$100,000,000
$80,000,000
$60,000,000
$40,000,000
$20,000,000
$0
10
20
30
40
50
60
Period
Class A Notes (Base Case)
In Scenario 2, the Class A Notes were repaid in period 30 (year 15) and the Class B Notes were repaid in
period 32 (year 16).
Page 32
Transaction Structure
Legal Structure
Transaction
Structure
The SolarCity LMC Series IV, LLC, Series 2015-1 Class A Notes and Class B Notes are
newly issued asset-backed notes secured by the equity interests of the Managing
Members in the related Financing Funds that own a portfolio of PV Systems and any
proceeds received under the Tax Loss Insurance Policies. The following diagram
illustrates the basic securitization structure:
SolarCity
Corporation
Originator
100%
Ownership
Note
Proceeds
SolarCity LMC
Holdings IV. LLC
Depositor
Contribution Agreement
100%
Ownership
Semi-annual Payments
Note Proceeds
100%
Ownership
Tax
Equity
Investor
100% Class A
Member
Solar Integrated
Manager I, LLC
Managing Member
100% Class B
Member
Managing
Member
Distributions
100% Class A
Member
Blue Skies
Solar I, LLC
Financing Fund
Manager Transition
Agreement
US Bank
Transition Manager
Managing Member
Distributions
Solar Integrated
Manager II, LLC
Managing Member
100% Class B
Member
Tax
Equity
Investor
100% Class A
Member
Solar Integrated
Fund I, LLC
Financing Fund
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Tax
Equity
Investor
100% Class A
Member
100% Class B
Member
Managing
Member
Distributions
Solar Integrated
Fund II, LLC
Financing Fund
Customer Payments
PBI Payments & Rebates
Leases/PPAs
PV Systems
Visigoth Solar
Managing
Manager I, LLC
Managing Member
100% Class B
Member
Managing
Member
Distributions
Customer Payments
PBI Payments & Rebates
Leases/PPAs
PV Systems
Tax
Equity
Investor
Managing
Member
Distributions
Customer Payments
PBI Payments & Rebates
US Bank
Indenture Trustee
and Custodian
SolarCity LMC
Series IV. LLC
Issuer
Noteholders
Solar Ulysses
Manager I, LLC
Managing Member
Indenture
Custodial Agreement
Visigoth
Solar I, LLC
Financing Fund
Customer Payments
PBI Payments & Rebates
Leases/PPAs
PV Systems
Leases/PPAs
PV Systems
Priority of
Payments
On each payment date, available funds will be distributed to pay the following
amounts in the following order:
i.
ii.
Custodian fee;
iii.
Manager fee;
iv.
v.
vi.
vii.
viii.
ix.
To the Noteholders:
1. During a regular amortization period in the following order:,
a) Class A Scheduled Note Principal Payment;
b) Class A Unscheduled Note Principal Payment*, until the
outstanding note balance of Class A Notes is zero;
c) Class B Scheduled Note Principal Payment;
d) Class B Unscheduled Note Principal Payment*, until the
outstanding note balance of Class B Notes is zero;
e) Class B Deferred Interest
2. During an Early Amortization Period, first to the Class A Notes until
paid in full, and then to the Class B Notes to (1) reduce the outstanding
Class B Note balance to zero and (2) to pay any unpaid Class B
Deferred Interest;
x.
xi.
xii.
xiii.
Sequentially to the Class A and Class B Noteholders, any make whole amount;
xiv.
xv.
To the Issuer.
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Early
Amortization
Period
An Early Amortization Period will continue until the DSCR is greater than 1.15 for two
consecutive determination dates.
Class B Interest
Deferral Period
the DSCR is less than or equal to 1.00 for any determination date;
(ii)
(iii)
on the Anticipated Repayment Date, the Class A Notes and Class B Notes have
not been reduced to zero.
During a Class B Interest Deferral Period, so long as the Class A Notes are still
outstanding, interest and principal will be paid on the Class A Notes before interest
and principal will be paid on the Class B Notes. A Class B Interest Deferral Period
caused by an event described in clause (i) above will continue until the next
determination date on which the DSCR is greater than 1.00. A Class B Interest
Deferral Period caused by an event described in clause (ii) above will continue until all
Events of Default have been cured or waived. A Class B Interest Deferral Period
caused by an event described in clause (iii) above will continue until the Class A
Notes and Class B Notes have been reduced to zero.
DSCR/Insurance
Sweep Period
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During a DSCR/Insurance Sweep Period, the required liquidity reserve amount will
equal the aggregate outstanding note balance. A DSCR/Insurance Sweep Period will
continue until the DSCR is greater than 1.25 for one determination date and all
required insurance is obtained by the related Financing Fund.
Events of
Default
The occurrence of any of the following events will be an Event of Default under the
indenture:
1. failure to pay any note interest (excluding Class B Deferred Interest or PostARD Additional Note Interest) when due for three business days;
2. failure to pay the aggregate outstanding note balance of the Class A and Class
B Notes at the legal final maturity date;
3. certain bankruptcy or insolvency events occur with respect to the Issuer;
4. failure by the Issuer to perform certain covenants set forth in the indenture
which has not been cured within 30 days;
5. certain representations, warranties or statements of the Issuer (other than
certain representations and warranties relating to the eligibility of the solar
assets) prove to be incorrect in any material respect as of the time when the
same shall have been made and such condition is not remedied within 30 days
after notice;
6. failure of the Indenture Trustee to have a first perfected priority security
interest in the trust estate in favor of the Indenture Trustee;
7. the Issuer, all Financing Funds or all Managing Members become subject to
registration as an "investment company";
8. the Issuer, all Financing Funds or all Managing Members become taxable as an
association or publicly traded partnership taxable as a corporation;
9. the Originator or Depositor fails to pay the liquidated damages amount for a
defective solar asset; or
10. there remains in force, undischarged, unsatisfied, and unstayed for more than
30 consecutive days, any final non-appealable judgment in the amount of
$100,000 or more against the Issuer not covered by insurance.
Manager
Termination
Events
The occurrence of any of the following events will constitute a "Manager Termination
Event" under the Management Agreement:
(i)
failure by the Manager to make any required payment, transfer or deposit
within three business days of being due;
(ii)
failure by the Manager to deliver to the Indenture Trustee the quarterly
Manager report within five business days of being due;
(iii)
failure by the Manager to perform in any material respect any covenant of the
Manager which failure continues beyond any applicable cure periods and has a
material adverse effect on the Noteholders;
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(iv)
(v)
certain representations, warranties or statement of the Manager prove
incorrect in any material respect as of the time when the same shall have been
resulting in a material adverse effect on the Noteholders, and such condition
material adverse effect on the collateral or the Noteholders, subject to certain
periods set forth in the Management Agreement;
to be
made
has a
grace
(vi)
the Manager ceases to be engaged in the business of monitoring or
maintaining energy equipment of a type comparable to the related PV Systems;
(vii)
if SolarCity is the Manager, an Event of Default shall have occurred and is
continuing; or
(viii)
Representations
and Warranties
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