Quarterly report pursuant to Section 13 or 15(d)

Long-term Debt

v3.20.2
Long-term Debt
 6 Months Ended
Jun. 30, 2020
Debt Disclosure [Abstract]  
Long-term Debt 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		 Carrying Value of Assets Pledged as of
  June 30, 2020 December 31, 2019 Interest
Rate		 Maturity Date June 30, 2020 December 31, 2019 Description
of Assets Pledged
(dollars in millions)
HASI Sustainable Yield Bond 2015-1A $ 84    $ 85    4.28% October 2034 $ —    $ 134    $ 126    Receivables, real estate and real estate intangibles
HASI Sustainable Yield Bond 2015-1B Note 13    13    5.41% October 2034 —    134    126    Class B Bond of HASI Sustainable Yield Bond 2015-1
2017 Credit
Agreement (1)
—    61    4.12% January 2023 —    —    120    Equity interests in Strong Upwind Holdings I, II, III, and IV LLC, and Northern Frontier, LLC
HASI SYB Loan Agreement 2015-2 23    28    4.37%
(2)
 December 2023 —    71    73    Equity interest in Buckeye Wind Energy Class B Holdings LLC, related interest rate swap
HASI SYB Trust 2016-2 71    72    4.35% April 2037 —    76    76    Receivables
HASI ECON 101 Trust 127    129    3.57% May 2041 —    132    135    Receivables and investments
HASI SYB Trust 2017-1 153    155    3.86% March 2042 —    206    206    Receivables, real estate and real estate intangibles
Lannie Mae Series 2019-01 96    96    3.68% January 2047 108    106    Receivables, real estate and real estate intangibles
Other non-recourse
debt (3)
73    77   
3.15% - 7.23%
 2022 to 2032 18    73    77    Receivables
Unamortized financing costs (14)   (16)  
Non-recourse debt (4)
$ 626    $ 700   
(1)This loan was prepaid in January 2020.
(2)Interest rate represents the current period’s LIBOR based rate plus the spread. We have hedged the LIBOR rate exposure for the HASI SYB Loan Agreement 2015-2 using interest rate swaps fixed at 2.55%.
(3)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.
(4)The total collateral pledged against our non-recourse debt was $800 million and $921 million as of June 30, 2020 and December 31, 2019, respectively. In addition, $25 million and $23 million of our restricted cash balance was pledged as collateral to various non-recourse loans as of June 30, 2020 and December 31, 2019, 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 June 30, 2020 and December 31, 2019.
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 June 30, 2020, were as follows:

Future minimum maturities
(in millions)
July 1, 2020 to December 31, 2020 $ 17   
2021 25   
2022 27   
2023 53   
2024 34   
2025 31   
Thereafter 453   
Total minimum maturities $ 640   
Unamortized financing costs (14)  
Total non-recourse debt $ 626   

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.
Senior Unsecured Notes
We have outstanding senior unsecured notes issued jointly by certain of our TRSs and are guaranteed by the Company and certain other subsidiaries which mature in 2024 and 2025 (the "2024 Notes" and the "2025 Notes" respectively, and together, the "Senior Unsecured Notes"). The Senior Unsecured Notes are subject to covenants which limit our ability to incur additional indebtedness and require us to maintain unencumbered assets of not less than 120% of our unsecured debt. These covenants will terminate on any date at which the Senior Unsecured Notes have been rated investment grade by two of the three major credit rating agencies and no event of default has occurred. We are in compliance with all of our covenants as of June 30, 2020 and December 31, 2019. The Senior Unsecured Notes impose certain requirements in the event that we merge with or sell substantially all of our assets to another entity. The proceeds of our Senior Unsecured Notes are used to acquire or refinance, in whole or in part, eligible green projects, including assets which are neutral to negative on incremental carbon emissions.
The following are summarized terms of the 2024 Notes and 2025 Notes.
Outstanding Principal Amount Maturity Date Stated Interest Rate Interest Payment Dates
Redemption Terms Modification Date (1)
(in millions)
2024 Notes $ 500   
(2)
 July 15, 2024 5.25  % January 15th and
July 15th		 July 15, 2021
2025 Notes $ 400    April 15, 2025 6.00  % April 15 and
October 15th		 April 15, 2022

(1)Prior to this date, we may redeem, at our option, some or all of the Senior Unsecured Notes for the outstanding principal amount plus the applicable “make-whole” premium as defined in the indenture governing the Senior Unsecured Notes plus accrued and unpaid interest through the redemption date. In addition, prior to this date, we may redeem up to 40% of the Senior Unsecured Notes using the proceeds of certain equity offerings at a price equal to 105.25% of the principal amount thereof, plus accrued but unpaid interest, if any, to, but excluding, the applicable redemption date. On, or subsequent to, this date we may redeem the Senior Unsecured Notes in whole or in part at redemption prices defined in the indenture governing the Senior Unsecured Notes, plus accrued and unpaid interest though the redemption date.
(2)We issued $150 million of the $500 million aggregate principal amount of the 2024 Notes for total proceeds of $157 million ($155 million net of issuance costs) at an effective rate of 4.13%.
The following table presents a summary of the components of the Senior Unsecured Notes:
  June 30, 2020 December 31, 2019
(in millions)
Principal $ 900    $ 500   
Accrued interest 17    13   
Unamortized premium 6    7   
Less: Unamortized financing costs (12)   (8)  
Carrying value of Notes $ 911    $ 512   

We recorded approximately $12 million and $18 million, in interest expense related to the Senior Unsecured Notes in the three and six months ended June 30, 2020, respectively.
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 $0.34 payable to stockholders of record on July 2, 2020, which results in a conversion rate after that date of 36.7680 for each $1,000 principal amount of convertible notes with a conversion price of $27.20. The conversion rate is subject to adjustment for dividends declared above $0.33 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:

  June 30, 2020 December 31, 2019
(in millions)
Principal $ 150    $ 150   
Accrued interest 2    2   
Less: Unamortized financing costs (2)   (3)  
Carrying value of convertible notes $ 150    $ 149   
We recorded approximately $2 million and $4 million in interest expense related to the convertible notes in the each of three and six months ended June 30, 2020 and 2019, respectively.