HA Sustainable Infrastructure Capital, Inc. Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

Long-term Debt

Long-term Debt

3 Months Ended

Mar. 31, 2019

Debt Disclosure [Abstract]

Long-term Debt

Non-recourse debt

We have outstanding the following asset-backed non-recourse debt and bank loans:



	Outstanding Balance as of									Anticipated Balance at Maturity		Value of Assets Pledged as of
	March 31, 2019			December 31, 2018			Interest Rate		Maturity Date	Anticipated Balance at Maturity		March 31, 2019		December 31, 2018		Description of Assets Pledged
	(dollars in millions)
HASI Sustainable Yield Bond 2013-1	$	38		$	55		2.79%		December 2019	$	35	$	48	$	76	Receivables
HASI Sustainable Yield Bond 2015-1A	89			90			4.28%		October 2034	—		135		135		Receivables, real estate and real estate intangibles
HASI Sustainable Yield Bond 2015-1B Note	13			13			5.41%		October 2034	—		135		135		Class B Bond of HASI Sustainable Yield Bond 2015-1
2017 Credit Agreement	103			112			4.12%		January 2023	—		116		151		Equity interests in Strong Upwind Holdings I, II, III, and IV LLC, and Northern Frontier, LLC
HASI SYB Loan Agreement 2015-2	30			32			6.67%	⁽¹⁾	December 2023	—		71		72		Equity interest in Buckeye Wind Energy Class B Holdings LLC, related interest rate swap
HASI SYB Trust 2016-2	78			77			4.35%		April 2037	—		81		81		Receivables
2017 Master Repurchase Agreement	61			56			5.11%	⁽¹⁾	July 2019	57		72		67		Receivables and investments
HASI ECON 101 Trust	133			133			3.57%		May 2041	—		137		137		Receivables and investments
HASI SYB Trust 2017-1	158			159			3.86%		March 2042	—		207		208		Receivables, real estate and real estate intangibles
Other non-recourse debt ⁽²⁾	128			125			3.15% - 7.45%		2019 to 2046	18		174		178		Receivables
Debt issuance costs	(16		)	(17		)
Non-recourse debt ⁽³⁾	$	815		$	835


(1)	Interest rate represents the current period’s LIBOR based rate plus the spread. We have hedged the LIBOR rate exposure using interest rate swaps fixed at 2.55% and 2.42% for HASI SYB Loan Agreement 2015-2 and 2017 Master Repurchase Agreement, respectively.


(2)	Other non-recourse debt consists of various debt agreements used to finance certain of our receivables for their term. Debt service payment requirements, in a majority of cases, are equal to or less than the cash flows received from the underlying receivables.


(3)	The total collateral pledged against our non-recourse debt was $1,041 million and $1,105 million as of March 31, 2019 and December 31, 2018, respectively. In addition, $42 million and $35 million of our restricted cash balance was pledged as collateral to various non-recourse loans as of March 31, 2019 and December 31, 2018, respectively.

We have pledged the financed assets, and typically our interests in one or more parents or subsidiaries of the borrower that are legally separate bankruptcy remote special purpose entities as security for the non-recourse debt. There is no recourse for repayment of these obligations other than to the applicable borrower and any collateral pledged as security for the obligations. Generally, the assets and credit of these entities are not available to satisfy any of our other debts and obligations. The creditors can only look to the borrower, the cash flows of the pledged assets and any other collateral pledged, to satisfy the debt and we are not otherwise liable for nonpayment of such cash flows. The debt agreements contain terms, conditions, covenants, and representations and warranties that are customary and typical for transactions of this nature, including limitations on the incurrence of liens and indebtedness, investments, fundamental organizational changes, dispositions, changes in the nature of business, transactions with affiliates, use of proceeds and stock repurchases. The agreements also include customary events of default, the occurrence of which may result in termination of the agreements, acceleration of amounts due, and accrual of default interest. We typically act as servicer for the debt transactions. We are in compliance with all covenants as of March 31, 2019 and December 31, 2018.

We have guaranteed the accuracy of certain of the representations and warranties and other obligations of certain of our subsidiaries under certain of the debt agreements and provided an indemnity against certain losses from “bad acts” of such subsidiaries including fraud, failure to disclose a material fact, theft, misappropriation, voluntary bankruptcy or unauthorized transfers. In the case of the debt secured by certain of our renewable energy equity interests, we have also guaranteed the compliance of our subsidiaries with certain tax matters and certain obligations if our joint venture partners exercise their right to withdraw from our partnerships.

The stated minimum maturities of non-recourse debt as of March 31, 2019, were as follows:



	Future minimum maturities
	(in millions)
April 1, 2019 to December 31, 2019	$	123
2020	24
2021	26
2022	27
2023	152
2024	34
Thereafter	445
Total minimum maturities	$	831
Deferred financing costs, net	(16		)
Total non-recourse debt	$	815

The stated minimum maturities of non-recourse debt above include only the mandatory minimum principal payments. To the extent there are additional cash flows received from our investments in renewable energy projects serving as collateral for certain of our non-recourse debt facilities, these additional cash flows are required to be used to make additional principal payments against the respective debt. Any additional principal payments made due to these provisions may impact the anticipated balance at maturity of these financings.

Convertible Senior Notes

We issued $150 million aggregate principal amount ($145 million net of issuance costs) of 4.125% convertible senior notes due September 1, 2022. Holders may convert any of their convertible notes into shares of our common stock at the applicable conversion rate at any time prior to the close of business on the second scheduled trading day immediately preceding the maturity date, unless the convertible notes have been previously redeemed or repurchased by us. Our board of directors approved a dividend of $0.335 payable to stockholders of record on April 3, 2019, which results in a conversion rate after that date of 36.7179 for each $1,000 principal amount of convertible notes with a conversion price of $27.23. The conversion rate is subject to adjustment for dividends declared above $0.335 per share per quarter and certain other events that may be dilutive to the holder.

Following the occurrence of a make-whole fundamental change, we will, in certain circumstances, increase the conversion rate for a holder that converts its convertible notes in connection with such make-whole fundamental change. There are no cash settlement provisions in the convertible notes and the conversion option can only be settled through physical delivery of our common stock. Additionally, upon the occurrence of certain fundamental changes involving us, holders of the convertible notes may require us to redeem all or a portion of their convertible notes for cash at a price of 100% of the principal amount outstanding, plus accrued and unpaid interest.

We have a redemption option to call the convertible notes prior to maturity (i) on or after March 1, 2022 and (ii) at any time if such a redemption is deemed reasonably necessary to preserve our qualification as a REIT. The redemption price will be equal to the principal of the notes being redeemed, plus accrued and unpaid interest. In the event of redemption after March 1, 2022, there will be an additional make-whole premium paid to the holder of the redeemed notes unless the redemption is deemed reasonably necessary to preserve our qualification as a REIT.

The following table presents a summary of the components of the convertible notes:



	March 31, 2019			December 31, 2018
	(in millions)
Principal	$	150		$	150
Accrued interest	1			2
Less:
Unamortized financing costs	(4		)	(4		)
Carrying value of convertible notes	$	147		$	148

We recorded approximately $2 million in interest expense related to the convertible notes in both the three months ended March 31, 2019 and March 31, 2018.