Business Context and Reporting Period
This Form 8-K Current Report was filed by Hannon Armstrong Sustainable Infrastructure Capital, Inc. on December 12, 2018. The filing discloses material events regarding a proposed public equity offering, negotiations for new senior secured credit facilities, and an update on the company's at-the-market (ATM) equity program.
Key Financial Metrics and Capital Structure
The filing does not provide specific revenue, profit, cash flow, or margin figures for the reporting period. However, it details the following capital structure and financing metrics:
- Proposed Equity Offering: 5 million shares of common stock ($0.01 par value).
- Proposed Credit Facilities:
- Rep-Based Loan Agreement: $250 million senior secured revolving limited-recourse facility.
- Approval-Based Loan Agreement: $200 million senior secured revolving recourse facility.
- Total Proposed Capacity: $450 million.
- ATM Program Activity: Approximately 2.75 million shares sold since September 30, 2018.
- Interest Rates (Proposed):
- Rep-Based: 1-month LIBOR + 1.40% to 1.85% (or Fed Funds Rate + 0.40% to 0.85%).
- Approval-Based: 1-month LIBOR + 1.50% to 2.00% (or Fed Funds Rate + 0.50% to 1.00%).
- Availability Fees (Rep-Based): 0.60% annually on undrawn commitments.
Material Changes and Proposed Transactions
The primary material change is the initiation of a proposed public offering of 5 million shares via a preliminary prospectus supplement filed under an effective shelf registration statement (Form S-3). Additionally, the company is negotiating to replace existing credit facilities with new loan agreements totaling $450 million, maturing on July 19, 2023. The company intends to use proceeds from the new credit facilities to repay existing facilities in full upon closing.
Guidance, Risks, and Contingencies
Management Commentary and Outlook: The company expects the new credit facilities to include customary covenants, such as maintenance of an interest coverage ratio and limitations on liens, indebtedness, and fundamental organizational changes. Proceeds from the equity offering and credit facilities are intended to support the company's business operations and debt refinancing.
Risks and Contingencies:
- Closing Uncertainty: There is no assurance that the proposed equity offering or the new credit facilities will close on the described terms or at all.
- Default Provisions: The proposed loan agreements include customary events of default, including cross-default provisions. An event of default could result in termination of the agreements and acceleration of amounts due.
- Collateral Requirements: Inclusion of financings in the borrowing base for the Rep-Based Loan Agreement is subject to representations and warranties, while the Approval-Based Loan Agreement requires super-majority lender approval for collateral inclusion.
Key Facts for Investor Verification
- Verify the final terms and closing status of the proposed 5 million share equity offering.
- Confirm the execution and closing of the $450 million in new credit facilities and the repayment of existing debt.
- Review the final interest rate spreads and fee structures in the executed loan agreements compared to the preliminary terms.
- Monitor the company's compliance with the proposed interest coverage ratio and other affirmative/negative covenants.
- Assess the impact of the 2.75 million shares sold under the ATM program since September 30, 2018, on existing shareholder dilution.