KBRA Maintains Watch Developing Placement on SunStrong 2018-1 Issuer, LLC
16 Sep 2024 | New York
KBRA maintains its Watch Developing Placement on the Class A Notes of SunStrong 2018-1 Issuer, LLC (SunStrong 2018-1 or Issuer), a residential solar lease transaction. The rating was initially placed on Watch Developing in December 2023 due to the financial health of SunPower Corporation (SunPower or the Company) whose subsidiary, SunPower Capital Services LLC, serves as sub-manager. The company subsequently filed a voluntary petition for relief under Chapter 11 of U.S. Bankruptcy code on August 5, 2024. This bankruptcy filing included the sub-manager. As part of its bankruptcy plan, SunPower is seeking to sell its ownership interest in SunStrong, which is expected to be completed by September 2024 month end. The Watch Placement will be maintained as KBRA considers additional information, including the pending sale of SunPower’s assets.
The table below displays the current capital structure as of the August 2024 remittance report.
Prior to filing for bankruptcy, on August 1, 2024, Launch Servicing, LLC (Launch) was appointed as sub-servicer and is responsible for all billing and collection activities on Sunstrong 2018-1. The appointment of Launch should help mitigate performance issues relating to collections. The manager of the transaction, SunStrong Capital Holdings, LLC (SunStrong), was formed in 2018 and is jointly owned 51% directly by SunPower and 49% indirectly by HannonArmstrong.
The transaction includes GreatAmerica Portfolio Services Group LLC (GreatAmerica) as transition manager who will assist in the transition to a replacement manager if there is a manager termination event and upon written request from the indenture trustee (acting at the written direction of the majority noteholders). Although a manager termination event has occurred on August 5, 2024 when the bankruptcy filing occurred, the indenture trustee has not requested the transition manager to assist in finding a replacement manager and the manager has not failed to perform any of its material obligations. As a result, an early amortization period is not expected to occur if 60 days elapse from the occurrence of the manager termination event without a replacement of SunPower as sub-manager.
Manager termination events per the transaction documents include, but are not limited to:
- certain events of bankruptcy, insolvency, receivership or reorganization of the manager or the sub-manager; or
- the manager or the sub-manager ceases to be engaged in the business of monitoring or maintaining assets of a type comparable to the solar assets.
An early amortization period per the transaction documents will be triggered if a manager termination event occurred and is continuing and the following occurs:
- the manager has failed to perform any of its material obligations,
- the super-majority noteholders have provided written notification to the indenture trustee that they intend to deliver a termination notice and
- 60 days has elapsed since the delivery of such written notification and Hannon Armstrong Capital, LLC has not been appointed as a replacement sub-manager under the management agreement unless a replacement manager has been appointed.
The Watch Placement will continue to be maintained as KBRA considers additional information, including the pending sale of SunPower’s assets.
To access rating and relevant documents, click here.