Business Context and Reporting Period
This Form 8-K Current Report, dated June 28, 2021, is filed by Hannon Armstrong Sustainable Infrastructure Capital, Inc. (the "Company"). The filing reports the entry into a material definitive agreement regarding the issuance of new senior notes and the creation of a direct financial obligation.
Key Financial Metrics and Transaction Details
- New Debt Issuance: The Company's indirect subsidiaries issued $1,000,000,000 aggregate principal amount of 3.375% Senior Notes due 2026.
- Interest Rate: 3.375% per year, payable semi-annually in arrears beginning December 15, 2021.
- Maturity Date: June 15, 2026.
- Use of Proceeds: Approximately $514 million of net proceeds will be used to redeem the existing 5.25% Senior Notes due 2024 (including related premiums). Remaining proceeds will be used to acquire or refinance eligible green projects.
- Debt Structure: The Notes are senior unsecured obligations, guaranteed by the Company, its Operating Partnership, and Hannon Armstrong Capital, LLC.
Material Changes and Strategic Actions
The primary material change is the refinancing of existing debt. The Company is replacing its 5.25% Senior Notes due 2024 with new notes carrying a lower interest rate of 3.375%. This action is expected to reduce interest expense and extend the maturity profile of the Company's debt. The new notes were issued in a private offering to qualified institutional buyers and non-U.S. persons.
Terms, Covenants, and Risks
- Optional Redemption: Prior to March 15, 2026, the Issuers may redeem the Notes at 100% of principal plus a "make-whole" premium. Up to 40% of the Notes may be redeemed prior to this date using equity proceeds at 103.375% of principal. On or after March 15, 2026, the Notes may be redeemed at 100% of principal.
- Change of Control: If a Change of Control Triggering Event occurs, the Issuers must offer to repurchase the Notes at 101% of the principal amount plus accrued interest.
- Covenants: The Indenture limits the ability to incur additional indebtedness and requires the maintenance of Total Unencumbered Assets of not less than 120% of the aggregate principal amount of outstanding Unsecured Indebtedness.
- Springing Guarantee: Certain Domestic Subsidiaries may be required to guarantee the Notes in the future under specific circumstances, though this covenant may terminate if the Notes achieve investment-grade ratings.
Investor Verification Checklist
- Verify the exact redemption price and premium paid for the 5.25% Senior Notes due 2024 to confirm the net cost of refinancing.
- Review the full text of the Indenture (Exhibit 4.1) for specific definitions of "Total Unencumbered Assets" and "Unsecured Indebtedness" to assess covenant headroom.
- Confirm the timeline for the deployment of remaining net proceeds into green projects versus temporary interest-bearing investments.
- Monitor credit rating agency actions to determine if the "Springing Guarantee Covenant" or other covenants will terminate based on investment-grade status.