GOOD comes to market with $271.5 million sustainable home improvement ABS

Goldman Sachs Lending Partners is preparing to sponsor a $271.5 million asset-backed securities (ABS) called the GoodLeap Sustainable Home Solutions Trust 2023-1, secured by sustainable home improvement loans.

Sustainable home improvement loans is a broad category financing for solar panels and batteries to prime credit quality homeowners. The lending also includes home efficiency improvements like LED lighting, heating venting and air conditioning, home performance upgrades, water efficiency and generators, according to Kroll Bond Rating Agency. Loan proceeds financed solar energy systems in this case.  

Citigroup Global Markets, Credit Suisse Securities and Goldman Sachs & Co. are managing the transaction, according to the Asset Securitization Report database.

Funding for solar panels occurs about one month after installation, typically. This industry timeline extends the first payment due date to about 90 days after the panels are put onto the property. To better reflect this market characteristic, in Q3 2022 GoodLeap increased its first payment deferral period from the first month after funding to the second month, according to KBRA.

Among other features GOOD 2023-1 issues notes through a vertical risk retention structure, KBRA said. All available funds will be deposited into the collection account and segregated into a 95.0% note holder available fund and a 5.0% retained interest available fund.

The structure includes a number of credit enhancement features, including yield supplement over-collateralization (OC), subordination in classes A, B and C, and a reserve account. The reserve account, in particular, will be established at closing and funded with 1.00% of the initial aggregate note balance, with a floor of 0.10% of the closing note balance.

There are a number of features with mixed credit implications in GOOD 2023-1. For one, it is possible for the junior notes in the three-tranche structure to receive certain regular principal payments before more senior notes, according to KBRA. Principal payments to the junior notes will applicable if each more senior class maintains its specified OC amounts.

KBRA expects to assign ratings of ‘A’ to the $20.8 million, class A notes; ‘BBB’ to the $17.7 million, class B notes and ‘BB’ to the $12.9 million, class C notes.

S&P Global Ratings plans to assign similar ratings to the GOOD 2023-1 notes.

The notes are scheduled to make final payments on Feb. 20, 2055, according to both rating agencies.