Business Context and Reporting Period
Company: Hannon Armstrong Sustainable Infrastructure Capital, Inc. (HASI)
Filing Type: Form 8-K (Current Report)
Date of Report: April 13, 2022
Event: Entry into a Material Definitive Agreement regarding the issuance of debt securities.
Key Financial Metrics and Transaction Details
This filing details a capital raise rather than periodic operating results. Key metrics related to the transaction include:
- Instrument: 0.00% Green Exchangeable Senior Notes due 2025.
- Initial Principal Amount: $200 million.
- Over-Allotment Option: Up to an additional $30 million.
- Yield to Maturity: 3.25% (accrued via principal accretion, not regular interest payments).
- Maturity Date: May 1, 2025.
- Exchange Price: Approximately $56.54 per share of Common Stock (initial exchange rate of 17.6873 shares per $1,000 note).
- Use of Proceeds: Acquisition or refinancing of eligible green projects; temporary investment in interest-bearing accounts/securities consistent with REIT qualification.
Material Changes and Debt Structure
The issuance represents a material increase in the Company's debt obligations. The Notes are structured as follows:
- Ranking: Senior unsecured obligations of the Issuers (HAT Holdings I LLC and HAT Holdings II LLC).
- Guarantees: Fully and unconditionally guaranteed by the Company, the Operating Partnership, and Hannon Armstrong Capital, LLC.
- Parity: Pari passu with existing senior unsecured indebtedness (including 6.00% Senior Notes due 2025, 3.375% Senior Notes due 2026, and 3.75% Senior Notes due 2030).
- Subordination: Effectively subordinated to secured indebtedness and subsidiary liabilities.
Outlook, Risks, and Management Commentary
Management Intent: The Company intends to allocate net proceeds to green projects, including those with disbursements made in the 12 months prior to issuance or to be made following issuance. Proceeds will be invested temporarily to maintain REIT tax qualification.
Key Provisions and Risks:
- Exchangeability: Holders may exchange Notes for Common Stock prior to maturity. The exchange rate is subject to adjustment.
- Redemption: The Issuers may only redeem the Notes if the Board determines it is reasonably necessary to preserve REIT qualification.
- Fundamental Change: Holders may require repurchase at 100% of accreted principal plus accrued special interest upon a "fundamental change."
- Registration Rights: The Company agreed to file a shelf registration statement within 120 days to cover resales of shares upon exchange. Failure to meet obligations may trigger additional interest payments.
Investor Verification Checklist
- Verify the final amount of the over-allotment option exercised (up to $30 million).
- Confirm the specific allocation of proceeds to green projects in subsequent filings.
- Monitor the status of the shelf registration statement required under the Registration Rights Agreement.
- Review the impact of the new debt on the Company's leverage ratios and REIT compliance status.
- Check for any adjustments to the exchange rate or special interest events as defined in the Indenture.