Kroll Bond Rating Agency (KBRA) assigns preliminary ratings to four classes of notes issued by Mosaic Solar Loan Trust 2020-2 (“Mosaic 2020-2”), an asset-backed securitization collateralized by a pool of residential solar loans.
The collateral pool of Mosaic 2020-2 will include approximately $230.6 million of residential solar loans, which composes of $126.8 million in loans at closing and $103.8 million in additional prefunded solar loans. The preliminary ratings reflect the initial credit enhancement levels ranging from 54.66% for the Class A notes to 4.96% for the Class D notes.
Solar Mosaic, Inc. (“Mosaic” or the “Company”) is a California-based specialty finance company focused on originating and servicing consumer loans used for the purchase of residential solar systems. Mosaic was founded in 2011 and began originating residential solar system loans in June 2014. Mosaic originates loans to mostly prime credit quality homeowners through its partnerships with more than 300 active approved solar system installers/dealers. The Company directly originates loans in 46 states and the District of Columbia through its state lending licenses where required, and across all 50 states and the District of Columbia through lending partnerships with financial institutions.
The financial impact of COVID-19 has resulted in an economic slowdown and high unemployment, which can adversely impact the performance of the transaction and consumer loans in general. In considering this risk, KBRA applied additional stress scenarios by increasing its expected base case cumulative gross loss assumptions for this transaction. The assumption increase was derived from KBRA’s analysis of the relationship between the historical unemployment rate and annualized gross loss rates through the 2008-2009 financial crisis for different types of lending products.
KBRA applied its Global General Rating Methodology for Asset-Backed Securities, Global Consumer Loan ABS Rating Methodology, and its Global Structured Finance Counterparty Methodology as part of its analysis of the transaction’s underlying collateral pool and the proposed capital structure. KBRA also conducted an operational assessment of Mosaic, as well as a review of the transaction’s legal structure and transaction documents. KBRA will also review the operative agreements and legal opinions for the transaction prior to closing.
- Global General Rating Methodology for Asset-Backed Securities
- Global Structured Finance Counterparty Methodology
- Global Consumer Loan ABS Rating Methodology
Further information on key credit considerations, sensitivity analyses that consider what factors can affect these credit ratings and how they could lead to an upgrade or a downgrade, and ESG factors (where they are a key driver behind the change to the credit rating or rating outlook) can be found in the full rating report referenced above.
A description of all substantially material sources that were used to prepare the credit rating and information on the methodology(ies) (inclusive of any material models and sensitivity analyses of the relevant key rating assumptions, as applicable) used in determining the credit rating is available in the U.S. Information Disclosure Form located here.
Information on the meaning of each rating category can be located here.
Further disclosures relating to this rating action are available in the U.S. Information Disclosure Form referenced above. Additional information regarding KBRA policies, methodologies, rating scales and disclosures are available at www.kbra.com.
KBRA is a full-service credit rating agency registered as an NRSRO with the U.S. Securities and Exchange Commission. In addition, KBRA is designated as a designated rating organization by the Ontario Securities Commission for issuers of asset-backed securities to file a short form prospectus or shelf prospectus. KBRA is also recognized by the National Association of Insurance Commissioners as a Credit Rating Provider and is a certified Credit Rating Agency (CRA) with the European Securities and Markets Authority (ESMA). Kroll Bond Rating Agency Europe is registered with ESMA as a CRA.