ABS: U.S. Property Assessed Clean Energy (PACE) Securitization Rating Methodology

Executive Summary

This report describes Kroll Bond Rating Agency, LLC and its rating affiliates’ (“KBRA”) rating methodology for U.S. property assessed clean energy (“PACE”) securitizations.

The underlying collateral in a PACE transaction is a voluntary tax lien (an assessment) authorized by the residential or commercial property owner to finance energy efficient improvements to the property. PACE transactions may be collateralized by tax liens on residential properties (“R-PACE”), commercial properties (“C-PACE”), or a combination of the two. The assessment originator’s underwriting of a PACE lien typically focuses on the property value and, in the case of R-PACE, the obligor’s creditworthiness and ability to pay. In addition, underwriting of a C-PACE assessment may also incorporate the cash flow generation ability of the underlying property used to service the assessment. Eligible improvements in most PACE programs include renewable energy solutions such as solar panels but also…