HA SUSTAINABLE INFRASTRUCTURE CAPITAL, INC.
Fitch Ratings has assigned a final rating of 'BBB-' to the
The assignment of the final rating follows the receipt of documents conforming to information already received. The final rating is the same as the expected rating assigned to the unsecured notes on
Key Rating Drivers
The final rating assigned to the senior unsecured notes is equalized with HASI's Long-Term IDR, reflecting its unsecured funding profile and available unencumbered asset pool, which suggest average recovery prospects for debtholders under a stressed scenario. The rating also reflects that the notes rank equally with existing unsecured debt issued by
HASI's ratings reflect its enhanced business profile and funding flexibility as well as its strong asset quality, solid operating performance and the maintenance of leverage within its target range. The firm has a proven record in the niche renewable-energy financing sector, with a large and profitable securitization platform and experienced management. It has converted to a C-corporation from a REIT, as the 90% income distribution requirement had historically been considered a rating constraint.
Rating constraints include HASI's modest scale, niche focus, increased competition within the renewable financing market and the need for continued capital market access to fund investment commitments and portfolio growth. However, this has been somewhat mitigated by the recently formed co-investment vehicle with
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade
An increase in non-accruals or impairments of equity investments and a sustained rise in leverage above the firm's target range could yield negative rating action. Beyond that, negative rating action could be driven by a large shift in HASI's risk profile, deterioration in operating performance, including a decline in the securitization business, or weaker funding flexibility, including a decline in the proportion of unsecured funding to below 60%.
Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade
Fitch does not expect positive rating momentum over the near term due to the current upgrade. Over the longer term, an upgrade could stem from the maintenance of the firm's market position in a more competitive environment, enhanced scale, profitable growth, continued strong portfolio credit trends, adequate liquidity with extended funding duration, leverage remaining under 1.5x and a steady portfolio risk profile.
DEBT AND OTHER INSTRUMENT RATINGS: KEY RATING DRIVERS
The rating on the unsecured debt is sensitive to changes to HASI's Long-Term IDR and the level of unencumbered balance sheet assets relative to outstanding debt. An increase in secured debt and/or a sustained decline in the level of unencumbered assets, to such an extent that expected recoveries on the senior unsecured debt were adversely affected, could result in the unsecured debt rating being notched down from the IDR.
The equalization of the unsecured debt rating with the Long-Term IDR reflects the funding mix and available unencumbered asset pool, which suggests average recovery prospects for debtholders under a stressed scenario.
DEBT AND OTHER INSTRUMENT RATINGS: RATING SENSITIVITIES
The unsecured debt rating is linked to the Long-Term IDR and are likely to move in tandem. However, a drop in the amount of unsecured debt in the capital structure in favor of secured borrowings or a fall in unencumbered assets could result in the unsecured debt rating being notched down from the Long-Term IDR.
Date of Relevant Committee
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING
The principal sources of information used in the analysis are described in the Applicable Criteria.
ESG Considerations
HASI has an ESG Relevance Score of '4' [+] for Exposure to Social Impacts as the shift in consumer awareness and preferences toward renewable energy and ESG aspects benefits the company's business model and its earnings and profitability. This has a positive impact on the credit profile, and is relevant to the rating in conjunction with other factors.
HASI has an ESG Relevance Score of '4' for Exposure to Environmental Impacts as the company is exposed to extreme weather events on some of its assets and operations and any hedges or other offsets are usually imperfect in nature. This has a negative impact on the credit profile, and is relevant to the rating in conjunction with other factors.
The highest level of ESG credit relevance is a score of '3', unless otherwise disclosed in this section. A score of '3' means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. Fitch's ESG Relevance Scores are not inputs in the rating process; they are an observation on the relevance and materiality of ESG factors in the rating decision. For more information on Fitch's ESG Relevance Scores, visit https://www.fitchratings.com/topics/esg/products#esg-relevance-scores.
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