SolarCity (NASDAQ: SCTY) Bonds are up for Sale!

SolarCity (NASDAQ:SCTY) and $200 Million in Solar Bonds

Written by Brian Hicks
Posted October 15, 2014

sctybondsBig news from SolarCity (NASDAQ: SCTY) came this morning. The California-based solar financing and installation company thats' been been driving the solar revolution in the United States has launched its first ever sale of solar bonds directly to individual investors.

We've been eagerly anticipating this moment, since we're just poor Americans who had to stand idly to the side as Canada's renewable energy companies one by one roll out equity investment vehicles to individuals.

But now, the US' top solar installer is giving us our chance.

SolarCity's registration with the Securities and Exchange Commission today calls for an issuance of $200 million in bonds in this initial offer period, which will be available to any U.S. investor who is at least 18 years of age and meets SolarCity's eligibility criteria.

...The main stipulation is that you can't be a resident of Florida unless you're buying these bonds through a broker.

(Sorry, retirees.)

Everyone else can set up a profile on SolarCity's online portal to browse the four types of open bonds, view their prospectuses, and make their investment.

The four bonds all require a minimum investment of $1,000, but SolarCity is offering four different maturities and interest rates. The one-year bond has a two percent interest rate, the two-year bond has a 2.5% rate, the three-year bond has a 3.0% rate, and the seven-year bond has a 4% rate.

Interest on all of these bonds is paid semi-annually, they're non-transferable, and there is no purchasing fee when buying directly from SolarCity.

To purchase the bonds, investors can set up a bank or wire transfer to their Solar City Solar Bonds account. This results in the construction of a rudimentary portfolio on the site, which includes a tally of owned bonds, pending bond orders, cash on hand, and pending transfers.

Depending upon how you purchase the bonds, payments are made in different ways. Investors who link their bank account to SolarCity's Bond portal will receive the funds directly in the account they've linked. If purchased through a broker, the fees are transferred there. If purchased through a Depository Trust Company, SolarCity will negotiate payment on a case-by-case basis.

How's it look?

This is the fourth debt offering from SolarCity in one year.

Last July, SolarCity priced $160 million in senior notes, and $41.5 million in junior notes. The senior notes were given a BBB+ rating by Standard & Poor's, which is quite a low rating; the third-lowest, in fact. The junior notes were not even classed as investment grade.

The previous April, it offered $70.2 million in bonds with a rating of 4.59 percent. Those tranches went to financing the installation of $5 billion in solar panels.

Though the company has recently underperformed against other solar companies, its ability to earn profits are not in question. The long game is what this company is all about.

For example, SolarCity launched the MySolar loan program, which combines the Power Purchase Agreement (PPA) style of financing with hardware leasing. Customers sign up for a 30-year loan at 4.5% interest, but the energy generated by the panels can be used to pay off the loan. At the end of the term, the power generated by the panels goes to the consumer free of charge.

If you're willing to stick with them, you'll be pulling down free energy.

Likewise, these bonds are being presented as an alternative to traditional fixed-income investment vehicles like savings accounts, CDs, and municipal- and treasury bonds.

They allow individual investors to bank on the long-term possibilities of SolarCity, without having to worry about the day to day fluctuations of the company's stock.