HA Sustainable Infrastructure Capital, Inc. Announces Issuance of \$600 Million 7.125% Green Junior Subordinated Notes Due 2056

Key Developments

• HA Sustainable Infrastructure Capital, Inc. (NYSE: HASI) has entered into a material definitive agreement relating to the issuance of \$600 million aggregate principal amount of 7.125% Green Junior Subordinated Notes due 2056.
• The Notes are designed as “green bonds” with proceeds earmarked for the acquisition, investment in, or refinancing of new and/or existing eligible green projects.
• The Notes are junior subordinated debt, meaning they are subordinate to all existing and future senior debt and effectively junior to secured debt and debt of subsidiaries.
• The Notes will mature on November 15, 2056, with interest payments at 7.125% per annum.
• Proceeds may be used, on an interim basis, to repay outstanding borrowings under the company’s unsecured revolving credit facility, commercial paper programs, or to redeem all or part of the company’s 8.00% Senior Notes due 2027.
• Any remaining proceeds prior to full investment in green projects will be held in interest-bearing accounts or short-term securities.
• The Notes are listed on the New York Stock Exchange (NYSE) under the ticker symbol HASI.

Important Shareholder & Price-Sensitive Information

• Potential Impact on Capital Structure: The issuance of \$600 million in junior subordinated notes will increase the company’s leverage and may impact debt ratios and interest expenses.
• Interest Rate and Terms: The 7.125% coupon rate is fixed until maturity, which may be attractive to investors seeking yield but could also raise funding costs for the company.
• Use of Proceeds: The company intends to allocate the funds to eligible green projects, which aligns with its sustainability objectives and could enhance long-term value for ESG-focused investors.
• Redemption Features: The Notes can be redeemed at 100% of principal plus accrued interest upon the occurrence of a Tax Event, and at 102% of principal plus accrued interest following a Rating Agency Event. These provisions provide some flexibility to the issuer but introduce potential call risk for noteholders.
• Subordination Risk: As junior subordinated debt, noteholders will rank below all senior obligations, which increases risk in the event of bankruptcy or liquidation.
• Dividend Restrictions During Optional Deferral: If the company elects to defer interest payments, it will be restricted from paying dividends, repurchasing equity, or making other payments on junior securities until all deferred interest is paid.
• No Sinking Fund: There is no sinking fund for the Notes, meaning the company is not required to set aside funds for eventual repayment, which could affect long-term liquidity planning.
• Tax Opinion: Legal counsel has opined that the Notes should be treated as debt for U.S. federal income tax purposes.
• Events of Default: The Indenture specifies standard events of default, which could accelerate repayment if triggered.
• Potential Share Price Impact: The new issuance may be viewed positively for supporting growth in green projects, but the addition of significant junior debt could raise concerns about leverage and future cash flow allocation, potentially affecting share value in the short term.

Additional Details

• Form and Denominations: The Notes will be issued in minimum denominations of \$2,000 and integral multiples of \$1,000 thereafter, in fully-registered book-entry form.
• Interest Deferral Option: The company may defer interest payments for one or more periods of up to five years each, although deferred interest will continue to accrue and compound at the interest rate.
• Covenants and Restrictions: During any period of optional interest deferral, the company is restricted from certain actions such as paying dividends or repurchasing equity, except for specific exceptions (e.g., employee benefit plans).
• Redemption Upon Special Events: The company may redeem the Notes in whole, but not in part, at:
  • 100% of principal plus accrued interest upon the occurrence of a Tax Event.
  • 102% of principal plus accrued interest following a Rating Agency Event.
• Listing and Trading: The Notes are expected to be listed on the NYSE, enhancing liquidity for investors.
• Legal and Tax Opinions: Clifford Chance US LLP provided opinions regarding legality and tax treatment, which are included as exhibits to the filing.
• Management Signatory: The filing is signed by Steven L. Chuslo, Executive Vice President and Chief Legal Officer, on behalf of the company.

Conclusion

The issuance of these green junior subordinated notes represents a significant financing event for HA Sustainable Infrastructure Capital, Inc. The transaction will have a direct impact on the company’s capital structure, cash flows, and ongoing commitment to sustainable investments. While this move aligns with the company’s green project objectives and may appeal to ESG investors, shareholders should carefully consider the implications of increased leverage, potential interest deferrals, and subordination risks associated with this new debt issuance. The flexibility to use proceeds for debt repayment or investment in eligible projects could support future growth, but the higher interest expense and junior ranking of the notes could introduce additional risk factors.

Disclaimer: This article is for informational purposes only and does not constitute investment advice. Investors should conduct their own due diligence and consult with their financial advisors before making investment decisions. The information presented is based on public filings and is believed to be accurate as of the publication date, but future events may result in material changes.

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