Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.
On February 23, 2024, a wholly owned, indirect subsidiary (the “Issuer”) of Sunnova Energy International Inc., a Delaware corporation (the “Company”), issued $166,000,000 aggregate principal amount of 5.30% Loan Backed Notes, Series 2024-A Class A (the “Class A Notes”), $33,900,000 aggregate principal amount of 6.00% Loan Backed Notes, Series 2024-A Class B (the “Class B Notes”) and $27,100,000 aggregate principal amount of 7.00% Loan Backed Notes, Series 2024-A Class C (the “Class C Notes” and, collectively with the Class A Notes and Class B Notes, the “Notes”). The Notes have an anticipated repayment date of February 20, 2031.
The Notes were offered within the United States only to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”), to institutional accredited investors under Section 4(a)(2) of the Securities Act, and to persons outside of the United States in compliance with Regulation S under the Securities Act. The Notes have not been registered under the Securities Act or the securities laws of any other jurisdiction. The Class A Notes, the Class B Notes and the Class C Notes have been rated AA-sf, A-sf and BBBsf, respectively, by Fitch Ratings, Inc.
The Collateral
The Notes are secured by the trust estate which consists primarily of all right, title and interest of the Issuer in a portfolio of loans made to consumers for the purpose of installing residential photovoltaic systems, energy storage systems and/or home sustainability products. Sunnova ABS Management, LLC, a Delaware limited liability company and a wholly owned, direct subsidiary of the Company (the “Manager”), will act as manager and servicer pursuant to the terms of a Management Agreement and Servicing Agreement between the Issuer and the Manager. The Manager will provide, or cause to be provided, all operations, maintenance, administrative, collection and other management and servicing services, as applicable, for the Issuer and in respect of the loans.
Events of Default and Amortization Events
The indenture related to the Notes contains events of default that are customary in nature for securitizations of this type, including, among other things, (a) the non-payment of interest, (b) material violations of covenants, (c) material breaches of representations and warranties and (d) certain bankruptcy events. An event of default will also occur with respect to the Notes if they are not paid in full at their rated final maturity. The Notes are also subject to amortization events that are customary in nature for securitizations of this type, including (a) the occurrence of an event of default, (b) the bankruptcy or insolvency of the Manager, (c) failure to deposit the amount required to be deposited in the collections account, (d) the amount of funds available for distribution falling below certain levels and (e) the cumulative default level rising above certain levels. The occurrence of an amortization event or an event of default could result in accelerated amortization of the Notes, and the occurrence of an event of default could, in certain instances, result in the liquidation of the collateral securing the Notes. In connection with the transaction, Sunnova Energy Corporation, a wholly owned, direct subsidiary of the Company, issued a performance guaranty covering (a) the performance of certain obligations of its affiliates, (b) the performance obligations of the Manager under the Management Agreement and Servicing Agreement and (c) the payment of certain expenses incurred by the Issuer and the Indenture Trustee.
Use of Proceeds
The Company intends to use the proceeds from the sale of the Class A Notes, the Class B Notes and the Class C Notes to finance or refinance, in whole or in part, existing or new investments and expenditures by the Company and its subsidiaries, including to simultaneously repay a portion of one or more currently existing financing arrangements of the Company’s subsidiaries.
Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
On February 20, 2024, the Compensation and Human Capital Committee (the “Committee”) of the Board of Directors (the “Board”) of the Company approved the following compensation arrangements for the Company’s named executive officers (as identified in the Company’s 2023 proxy statement), other than the Chief Executive Officer. Upon the recommendation of the Committee, the independent directors of the Board approved the following compensation arrangements for the Chief Executive Officer.