Business Context and Reporting Period
This Form 8-K Current Report was filed by Hannon Armstrong Sustainable Infrastructure Capital, Inc. on July 2, 2019. The filing discloses the entry into a material definitive agreement regarding the issuance of senior notes.
Key Financial Metrics and Transaction Details
- Debt Issuance: $350 million aggregate principal amount of 5.25% unsecured senior notes due 2024.
- Net Proceeds: Approximately $344 million.
- Interest Rate: 5.25% per year, payable semi-annually in arrears (January 15 and July 15).
- Maturity Date: July 15, 2024.
- Issuers: HAT Holdings I LLC and HAT Holdings II LLC (indirect subsidiaries).
- Guarantors: The Company, Hannon Armstrong Sustainable Infrastructure, L.P., and Hannon Armstrong Capital, LLC.
- Use of Proceeds: Acquisition or refinancing of eligible green projects (neutral to negative incremental carbon emissions) and repayment of outstanding revolving borrowings under senior secured credit facilities.
Material Changes Versus Prior Period
The filing does not provide comparative financial data (revenue, profit, or cash flow) against a prior period. The material change reported is the expansion of the company's capital structure through the new $350 million debt offering.
Guidance, Outlook, and Material Terms
- Green Bond Status: The Notes are intended to meet the environmental eligibility criteria for green bonds as defined by the International Capital Market Association's Green Bond Principles.
- Optional Redemption:
- Prior to July 15, 2021: Redeemable at 100% of principal plus a "make-whole" premium.
- Equity Redemption: Prior to July 15, 2021, up to 40% of Notes may be redeemed using proceeds from certain equity offerings at 105.25% of principal.
- On or after July 15, 2021: Redeemable at specified redemption prices.
- 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:
- Limits on incurring additional indebtedness.
- Requirement to maintain Total Unencumbered Assets of not less than 120% of aggregate outstanding Unsecured Indebtedness.
- Springing Guarantee Covenant: Additional Domestic Subsidiaries may be required to guarantee the Notes under certain circumstances, unless the Notes achieve investment-grade ratings from two specified agencies (Covenant Termination Date).
- Ranking: Senior unsecured obligations, pari passu with existing senior unsecured debt, and effectively subordinated to secured indebtedness.
Investor Verification Checklist
- Verify the specific allocation of the $344 million net proceeds between new green project acquisitions and the repayment of existing revolving credit facilities.
- Review the full Indenture (Exhibit 4.1) for detailed definitions of "Change of Control Triggering Event" and "Total Unencumbered Assets."
- Confirm the current credit rating status of the Notes to determine if the "Springing Guarantee Covenant" or other covenants are subject to termination.
- Assess the impact of the new 5.25% interest expense on the company's overall cost of capital and REIT qualification status.