Spruce Securitizes Debt for Energy Efficiency, Residential Solar

Spruce Finance Inc., a clean-energy financing company backed by Kleiner Perkins Caufield & Byers LLC, completed its first-ever securitization deal.

The company priced $83.8 million in notes, according to a statement Wednesday. They’re backed by energy-efficiency loans and receivables for residential solar systems, and are expected to be repaid in 2022 and 2023.

The securitization, one of the largest in the U.S. to support energy efficiency, is different from typical asset-backed securities, the company said. Securitization deals usually package loans for big-ticket items like homes and cars, borrowing that increases a consumer’s monthly expenses. With energy efficiency, the loans fund projects designed to reduce monthly utility bills.

“Here, you’re taking on an obligation to make an investment in their home, and helps them reduce the amount of water or heat they use,” Nat Kreamer, Spruce’s chief executive officer, said in an interview. “I’d rather take on somebody who is taking a loan to reduce their operating expenses than somebody taking out a loan for a fancy car. That’s something we were saying that was resonating with investors.”

Most of the collateral for the notes, representing 77.2 percent of the underlying assets, is from unsecured energy-efficiency installations, according to a pre-sale report by Kroll Bond Rating Agency Inc. The deal has two tranches, $73.5 million of Class A notes and $10.3 million of Class B notes. Kroll rates the Class A tranche A, and the Class B tranche BBB. Citigroup Inc. led the deal, which attracted about 10 investors including asset managers and insurance companies, Kreamer said.

The deal also provides a boost for other companies seeking to securitize rooftop solar, “given the intense skepticism on the ability for residential solar companies to raise capital at attractive terms,” Patrick Jobin, an analyst at Credit Suisse Group AG, said in a research note June 20.

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