SEC Company Response from HA Sustainable Infrastructure Capital, Inc. (HASI) (CIK 0001561894) (HASI) — Jan 21, 2016
HA Sustainable Infrastructure Capital, Inc. (HASI) (CIK 0001561894)
Date: Jan. 21, 2016 · CIK: 0001561894 · Accession: 0001193125-16-434825
AI Filing Summary & Sentiment
File numbers found in text: 000-35877
Referenced dates: January 6, 2016
Letter
VIA EDGAR AND BY FEDERAL EXPRESS United States Securities and Exchange Commission Division of Corporation Finance Re: Hannon Armstrong Sustainable Infrastructure Capital, Inc. Form 10-K for the Fiscal Year Ended December 31, 2014 Filed March 9, 2015 File No. 000-35877
Dear Mr. McPhee and Mr. Cline:
On behalf of Hannon Armstrong Sustainable Infrastructure Capital, Inc., (the “Company”), set forth below are the responses of the Company to the comments of the staff of the Division of Corporation Finance (the “Staff”) of the Securities and Exchange Commission (the “Commission”), received by letter dated January 6, 2016 (the “January 6 Letter”), with respect to the Company’s Form 10-K for the year ended December 31, 2014 (the “Form 10-K”). The responses to the Staff’s comments are set out in the order in which the comments were set out in the January 6 Letter and are numbered accordingly.
For reasons of business confidentiality, in a separate letter dated the date hereof, the Company has requested that certain confidential information not be disclosed in response to any request made under the Freedom of Information Act or otherwise. Accordingly, pursuant to Rule 83 (17 C.F.R. 200.83) of the Rules of Practice of the Commission, a complete copy of this letter will be provided only in paper form to the Staff and not electronically as correspondence under the Commission’s EDGAR system. A redacted version, which excludes the confidential information, has been filed electronically on the Commission’s EDGAR system as correspondence with the omitted information in the version filed via the EDGAR system identified by the mark “[***].”
Form 10-K for the fiscal year ended December 31, 2014
Financial Statements and Supplementary Data, page 91
Summary of Significant Accounting Policies, page 100
Securitization of Receivables, page 103
1. Please refer to your response to comment 1 and address the following:
●
Please provide us with an expanded description of the certain financing receivables and other debt investments that are included in the securitization trusts including the characteristics that make them primarily due from the federal government, as referenced in your response, and clarify your disclosure in future filings.
In response to the Staff’s comment, the Company advises that the receivables that the Company securitizes arise exclusively from the installation of energy efficiency and other technologies in facilities owned by, or operated for or by, the federal government where the federal government is the ultimate obligor. There are no other debt instruments in the securitization trusts.
CONFIDENTIAL TREATMENT REQUESTED BY
HANNON ARMSTRONG SUSTAINABLE INFRASTRUCTURE CAPITAL, INC.
HA_0001
PURSUANT TO RULE 83
Mr. Eric McPhee
Mr. Paul Cline
United States Securities and Exchange Commission
Division of Corporation Finance
100 F Street, N.E.
Washington, D.C. 20549-0404
January 21, 2016
For example, under a typical transaction, the Company provides financing to a third party service provider to install new more energy efficient lighting and air conditioning in a federal building. The third party service provider assigns the Company the payment stream from the federal government that provides for repayment of the financing. The repayment stream from the federal government is what is securitized.
In further response to the Staff’s comment, the Company will revise Note 5, Securitization of Receivables, beginning in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015, to include the following description of the Company’s securitized assets:
The securitized assets consist of financing receivables from contracts for the installation of energy efficiency and other technologies in facilities owned by, or operated for or by, the federal government where the ultimate obligor is the U.S. federal government. The contracts may have guarantees of energy savings from third party service providers, the majority of which are entities rated investment grade by an independent rating agency.
●
We note from your response that you have legal opinions in support of your use of sale accounting and that they include true-sale-at-law opinions and/or non-consolidation opinions. Please tell us and revise future filings to disclose, if true, that you have both a true-sale-at-law legal opinion and a non-consolidation legal opinion for each trust. Otherwise, provide a more detailed discussion of how you met the requirements of sale accounting.
In response to the Staff’s comment, the Company advises that in accordance with the guidance in ASC 860-10-40-5, the Company has obtained true-sale-at-law opinions for all of its trust structures and non-consolidation opinions for trust structures that represent over 97% of the Company’s securitized assets. There is one old trust structure (last used for a transaction in 2007) in which the buyer of the trust interest was a sophisticated Fortune 100 company and for which the Company received a true-sale-at-law opinion but not a non-consolidation opinion and in which the Company holds a very insignificant residual interest in the trust of approximately 0.2% of the trust’s assets.
The Company evaluated that trust structure in accordance with ASC 860-10-40-5 that sets forth criteria for control of the receivables to be considered transferred, which include: (1) legal isolation of the transferred financial assets, (2) transferee’s rights to pledge or exchange, and (3) effective control.
CONFIDENTIAL TREATMENT REQUESTED BY
HANNON ARMSTRONG SUSTAINABLE INFRASTRUCTURE CAPITAL, INC.
HA_0002
PURSUANT TO RULE 83
Mr. Eric McPhee
Mr. Paul Cline
United States Securities and Exchange Commission
Division of Corporation Finance
100 F Street, N.E.
Washington, D.C. 20549-0404
January 21, 2016
(1) As legal isolation is primarily a legal determination, the Company obtained a legal opinion from nationally recognized counsel to support the Company’s accounting conclusions that the trust structure meets the legal true-sale criterion. Although the Company did not obtain an opinion of counsel that the trust structure would not be substantively consolidated in the Company’s bankruptcy estate, the Company has experience with other transfers with similar facts and circumstances under the same applicable laws and regulations and believes that it had a reasonable basis to conclude that the appropriate non-consolidation opinion would be given, if requested (consistent with the guidance in ASC 860-10-55-18B). As such, the Company concluded, based upon consideration of the applicable laws and regulations along with the following factors, that such trust structure would not be substantively consolidated in the Company’s bankruptcy estate:
●
There is not “substantial identity” between the trust, on the one hand, and the Company or any of its other subsidiaries, on the other hand.
●
The Company and its other subsidiaries are operated as separate entities from the trust.
●
The Company undertakes such reasonable actions as may be necessary to indicate to any creditor that the receivables are owned by the trust and that the trust is separate from the Company and any of its other subsidiaries.
●
The Company’s consolidated financial statements make clear that the trust is a separate entity.
●
The trust maintains separate books and records, does not commingle its assets or business functions with the Company and any of its other subsidiaries, and has adequate capital to perform its contemplated obligations.
●
No creditor of the Company or any of its other subsidiaries is led to believe or to our knowledge believes that the trust is responsible for any of the Company’s or any of its other subsidiaries’ debts, that the assets of the trust are owned by the Company or any of its other subsidiaries, or that the trust is an entity that is not separate from the Company or its other subsidiaries.
●
The securitization transaction was not undertaken with the intent to hinder, delay or defraud any person or entity, and each transferor has received reasonably equivalent value and fair consideration in exchange for the transfer of its receivables.
CONFIDENTIAL TREATMENT REQUESTED BY
HANNON ARMSTRONG SUSTAINABLE INFRASTRUCTURE CAPITAL, INC.
HA_0003
PURSUANT TO RULE 83
Mr. Eric McPhee
Mr. Paul Cline
United States Securities and Exchange Commission
Division of Corporation Finance
100 F Street, N.E.
Washington, D.C. 20549-0404
January 21, 2016
●
The parties to the securitization transaction, the holders of the notes, and the other creditors of the trust reasonably relied upon (i) the separate identity and credit of the trust from the Company and its subsidiaries and (ii) the ownership by the trust of its assets when they entered into the transactions or otherwise extended credit to the trust, and each would be inequitably prejudiced by consolidation.
●
Neither the assets nor the creditworthiness of the trust have ever been held out as being available for the payment of any liability of the Company and any of its other subsidiaries, and the Company and each of its other subsidiaries have maintained readily apparent separate existences.
(2) There are no terms in the trust agreement that constrain the purchaser from pledging or exchanging the transferred receivables.
(3) The Company has relinquished control over the transferred financial assets. There are no provisions in the trust agreement that require or permit the Company to reacquire any of the transferred receivables.
As described above, given that all three criteria pursuant to ASC 860-10-40-5 were met, the Company concluded that the receivables transferred to this trust should be accounted for as sales rather than as secured borrowings.
In further response to the Staff’s comment, the Company will revise Note 2, Summary of Significant Accounting Policies – Securitization of Receivables, beginning in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015, by adding the following underlined language:
We account for transfers of financing receivables to these securitization trusts as sales pursuant to ASC 860, Transfers and Servicing, as we have concluded the transferred receivables have been isolated from the transferor (i.e., put presumptively beyond the reach of the transferor and its creditors, even in bankruptcy or other receivership) and we have surrendered control over the transferred receivables. We have received true-sale-at-law opinions for all of our securitization trust structures and non-consolidation legal opinions for all but one old securitization trust structure that support our conclusion regarding the transferred receivables. When we sell receivables in securitizations, we generally retain minor interests in the form of servicing rights and residual assets, which we refer to as securitization assets.
2. Please tell us if and under what circumstances the company is obligated to repurchase financing receivables and other debt instruments from the securitization trusts.
CONFIDENTIAL TREATMENT REQUESTED BY
HANNON ARMSTRONG SUSTAINABLE INFRASTRUCTURE CAPITAL, INC.
HA_0004
PURSUANT TO RULE 83
Mr. Eric McPhee
Mr. Paul Cline
United States Securities and Exchange Commission
Division of Corporation Finance
100 F Street, N.E.
Washington, D.C. 20549-0404
January 21, 2016
In response to the Staff’s comment, the Company advises that it does not have any obligations to repurchase the financing receivables from the securitization trusts in connection with a payment or other credit issue arising from or through any other party to the transaction. In some trusts, covered by true sale-at-law and non-consolidation opinions, the Company makes standard representations and warranties, and only a post closing impairment in title caused by the Company would potentially trigger a repurchase obligation. The Company considered whether a liability should be recorded in connection with this standard representation and warranty. The Company as part of its procedures validates proper title for its receivables and concluded the fair value for such contingent recourse, if any, would be de minimis and thus no liability was recorded. The Company also advises the Staff that it has never had to repurchase a receivable due to an impairment in title for any of its securitization trusts.
General
3. Please file the information referenced in Exhibit A on EDGAR. If you wish, you may file a request for confidential treatment, subject to the applicable rules.
In response to the Staff’s comment, the Company has attached the requested information referenced in Exhibit A to this letter under Exhibit A.
In connection with responding to the Staff’s comments, we acknowledge the following:
•
the Company is responsible for the adequacy and accuracy of the disclosure in the filing;
•
Staff comments or changes to disclosure in response to Staff comments do not foreclose the Commission from taking any action with respect to the filings; and
•
the Company may not assert Staff comments as a defense in any proceeding initiated by the Commission or any person under the federal securities laws of the United States.
If you have any questions, please do not hesitate to contact me at (410) 571-6179 or bherron@hannonarmstrong.com.
Very truly yours,
/s/ Brendan Herron
Show Raw Text
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filename1.htm
CORRESP
FOIA CONFIDENTIAL TREATMENT REQUESTED BY
HANNON ARMSTRONG SUSTAINABLE INFRASTRUCTURE CAPITAL, INC.
PURSUANT TO 17 C.F.R. 200.83
January 21, 2016
CERTAIN PORTIONS OF THIS LETTER HAVE BEEN OMITTED FROM THE VERSION FILED VIA EDGAR.
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS. INFORMATION THAT WAS OMITTED IN THE EDGAR VERSION HAS BEEN NOTED IN THIS LETTER WITH A PLACEHOLDER IDENTIFIED BY THE MARK “[***]”.
VIA EDGAR AND BY FEDERAL EXPRESS
Mr. Eric McPhee
Mr. Paul Cline
United States Securities and Exchange Commission
Division of
Corporation Finance
100 F Street, N.E.
Washington, D.C.
20549-0404
Re:
Hannon Armstrong Sustainable Infrastructure Capital, Inc.
Form 10-K for the Fiscal Year Ended December 31, 2014
Filed March 9, 2015
File No. 000-35877
Dear Mr. McPhee and Mr. Cline:
On behalf of Hannon Armstrong Sustainable Infrastructure Capital, Inc., (the “Company”), set forth below are the responses of the
Company to the comments of the staff of the Division of Corporation Finance (the “Staff”) of the Securities and Exchange Commission (the “Commission”), received by letter dated January 6, 2016 (the “January 6
Letter”), with respect to the Company’s Form 10-K for the year ended December 31, 2014 (the “Form 10-K”). The responses to the Staff’s comments are set out in the order in which the comments were set out in the
January 6 Letter and are numbered accordingly.
For reasons of business confidentiality, in a separate letter dated the date hereof,
the Company has requested that certain confidential information not be disclosed in response to any request made under the Freedom of Information Act or otherwise. Accordingly, pursuant to Rule 83 (17 C.F.R. 200.83) of the Rules of Practice of the
Commission, a complete copy of this letter will be provided only in paper form to the Staff and not electronically as correspondence under the Commission’s EDGAR system. A redacted version, which excludes the confidential information, has been
filed electronically on the Commission’s EDGAR system as correspondence with the omitted information in the version filed via the EDGAR system identified by the mark “[***].”
Form 10-K for the fiscal year ended December 31, 2014
Financial Statements and Supplementary Data, page 91
Summary of Significant Accounting Policies, page 100
Securitization of Receivables, page 103
1.
Please refer to your response to comment 1 and address the following:
●
Please provide us with an expanded description of the certain financing receivables and other debt investments that are included in the securitization trusts including the characteristics that make them
primarily due from the federal government, as referenced in your response, and clarify your disclosure in future filings.
In response to the Staff’s comment, the Company advises that the receivables that the Company securitizes arise
exclusively from the installation of energy efficiency and other technologies in facilities owned by, or operated for or by, the federal government where the federal government is the ultimate obligor. There are no other debt instruments in the
securitization trusts.
CONFIDENTIAL TREATMENT REQUESTED BY
HANNON ARMSTRONG SUSTAINABLE INFRASTRUCTURE CAPITAL, INC.
HA_0001
PURSUANT TO RULE 83
Mr. Eric McPhee
Mr. Paul Cline
United States Securities and Exchange Commission
Division of Corporation Finance
100 F Street, N.E.
Washington, D.C. 20549-0404
January 21, 2016
For example, under a typical transaction, the Company provides financing to
a third party service provider to install new more energy efficient lighting and air conditioning in a federal building. The third party service provider assigns the Company the payment stream from the federal government that provides for repayment
of the financing. The repayment stream from the federal government is what is securitized.
In further response to the
Staff’s comment, the Company will revise Note 5, Securitization of Receivables, beginning in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015, to include the following description of the
Company’s securitized assets:
The securitized assets consist of financing receivables from contracts for the installation of
energy efficiency and other technologies in facilities owned by, or operated for or by, the federal government where the ultimate obligor is the U.S. federal government. The contracts may have guarantees of energy savings from third party service
providers, the majority of which are entities rated investment grade by an independent rating agency.
●
We note from your response that you have legal opinions in support of your use of sale accounting and that they include true-sale-at-law opinions and/or non-consolidation opinions. Please tell us and revise
future filings to disclose, if true, that you have both a true-sale-at-law legal opinion and a non-consolidation legal opinion for each trust. Otherwise, provide a more detailed discussion of how you met the requirements of sale accounting.
In response to the Staff’s comment, the Company advises that in accordance with the guidance in
ASC 860-10-40-5, the Company has obtained true-sale-at-law opinions for all of its trust structures and non-consolidation opinions for trust structures that represent over 97% of the Company’s securitized assets. There is one old trust
structure (last used for a transaction in 2007) in which the buyer of the trust interest was a sophisticated Fortune 100 company and for which the Company received a true-sale-at-law opinion but not a non-consolidation opinion and in which the
Company holds a very insignificant residual interest in the trust of approximately 0.2% of the trust’s assets.
The
Company evaluated that trust structure in accordance with ASC 860-10-40-5 that sets forth criteria for control of the receivables to be considered transferred, which include: (1) legal isolation of the transferred financial assets,
(2) transferee’s rights to pledge or exchange, and (3) effective control.
CONFIDENTIAL TREATMENT REQUESTED BY
HANNON ARMSTRONG SUSTAINABLE INFRASTRUCTURE CAPITAL, INC.
HA_0002
PURSUANT TO RULE 83
Mr. Eric McPhee
Mr. Paul Cline
United States Securities and Exchange Commission
Division of Corporation Finance
100 F Street, N.E.
Washington, D.C. 20549-0404
January 21, 2016
(1) As legal isolation is primarily a legal determination, the Company
obtained a legal opinion from nationally recognized counsel to support the Company’s accounting conclusions that the trust structure meets the legal true-sale criterion. Although the Company did not obtain an opinion of counsel that the trust
structure would not be substantively consolidated in the Company’s bankruptcy estate, the Company has experience with other transfers with similar facts and circumstances under the same applicable laws and regulations and believes that it had a
reasonable basis to conclude that the appropriate non-consolidation opinion would be given, if requested (consistent with the guidance in ASC 860-10-55-18B). As such, the Company concluded, based upon consideration of the applicable laws and
regulations along with the following factors, that such trust structure would not be substantively consolidated in the Company’s bankruptcy estate:
●
There is not “substantial identity” between the trust, on the one hand, and the Company or any of its other subsidiaries, on the other
hand.
●
The Company and its other subsidiaries are operated as separate entities from the trust.
●
The Company undertakes such reasonable actions as may be necessary to indicate to any creditor that the receivables are owned by the trust and that
the trust is separate from the Company and any of its other subsidiaries.
●
The Company’s consolidated financial statements make clear that the trust is a separate entity.
●
The trust maintains separate books and records, does not commingle its assets or business functions with the Company and any of its other
subsidiaries, and has adequate capital to perform its contemplated obligations.
●
No creditor of the Company or any of its other subsidiaries is led to believe or to our knowledge believes that the trust is responsible for any of
the Company’s or any of its other subsidiaries’ debts, that the assets of the trust are owned by the Company or any of its other subsidiaries, or that the trust is an entity that is not separate from the Company or its other
subsidiaries.
●
The securitization transaction was not undertaken with the intent to hinder, delay or defraud any person or entity, and each transferor has
received reasonably equivalent value and fair consideration in exchange for the transfer of its receivables.
CONFIDENTIAL TREATMENT REQUESTED BY
HANNON ARMSTRONG SUSTAINABLE INFRASTRUCTURE CAPITAL, INC.
HA_0003
PURSUANT TO RULE 83
Mr. Eric McPhee
Mr. Paul Cline
United States Securities and Exchange Commission
Division of Corporation Finance
100 F Street, N.E.
Washington, D.C. 20549-0404
January 21, 2016
●
The parties to the securitization transaction, the holders of the notes, and the other creditors of the trust reasonably relied upon (i) the
separate identity and credit of the trust from the Company and its subsidiaries and (ii) the ownership by the trust of its assets when they entered into the transactions or otherwise extended credit to the trust, and each would be inequitably
prejudiced by consolidation.
●
Neither the assets nor the creditworthiness of the trust have ever been held out as being available for the payment of any liability of the Company
and any of its other subsidiaries, and the Company and each of its other subsidiaries have maintained readily apparent separate existences.
(2) There are no terms in the trust agreement that constrain the purchaser from pledging or exchanging the transferred
receivables.
(3) The Company has relinquished control over the transferred financial assets. There are no provisions in
the trust agreement that require or permit the Company to reacquire any of the transferred receivables.
As described
above, given that all three criteria pursuant to ASC 860-10-40-5 were met, the Company concluded that the receivables transferred to this trust should be accounted for as sales rather than as secured borrowings.
In further response to the Staff’s comment, the Company will revise Note 2, Summary of Significant Accounting
Policies – Securitization of Receivables, beginning in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015, by adding the following underlined language:
We account for transfers of financing receivables to these securitization trusts as sales pursuant to ASC 860, Transfers
and Servicing, as we have concluded the transferred receivables have been isolated from the transferor (i.e., put presumptively beyond the reach of the transferor and its creditors, even in bankruptcy or other receivership) and we have
surrendered control over the transferred receivables. We have received true-sale-at-law opinions for all of our securitization trust structures and non-consolidation legal opinions for all but one old securitization trust structure that support
our conclusion regarding the transferred receivables. When we sell receivables in securitizations, we generally retain minor interests in the form of servicing rights and residual assets, which we refer to as securitization assets.
2.
Please tell us if and under what circumstances the company is obligated to repurchase financing receivables and other debt instruments from the securitization trusts.
CONFIDENTIAL TREATMENT REQUESTED BY
HANNON ARMSTRONG SUSTAINABLE INFRASTRUCTURE CAPITAL, INC.
HA_0004
PURSUANT TO RULE 83
Mr. Eric McPhee
Mr. Paul Cline
United States Securities and Exchange Commission
Division of Corporation Finance
100 F Street, N.E.
Washington, D.C. 20549-0404
January 21, 2016
In response to the Staff’s comment, the Company advises that it does not have any
obligations to repurchase the financing receivables from the securitization trusts in connection with a payment or other credit issue arising from or through any other party to the transaction. In some trusts, covered by true sale-at-law and
non-consolidation opinions, the Company makes standard representations and warranties, and only a post closing impairment in title caused by the Company would potentially trigger a repurchase obligation. The Company considered whether a liability
should be recorded in connection with this standard representation and warranty. The Company as part of its procedures validates proper title for its receivables and concluded the fair value for such contingent recourse, if any, would be de minimis
and thus no liability was recorded. The Company also advises the Staff that it has never had to repurchase a receivable due to an impairment in title for any of its securitization trusts.
General
3.
Please file the information referenced in Exhibit A on EDGAR. If you wish, you may file a request for confidential treatment, subject to the applicable rules.
In response to the Staff’s comment, the Company has attached the requested information referenced in Exhibit A to this
letter under Exhibit A.
In connection with responding to the Staff’s comments, we acknowledge the following:
•
the Company is responsible for the adequacy and accuracy of the disclosure in the filing;
•
Staff comments or changes to disclosure in response to Staff comments do not foreclose the Commission from taking any action with respect to the filings; and
•
the Company may not assert Staff comments as a defense in any proceeding initiated by the Commission or any person under the federal securities laws of the United States.
If you have any questions, please do not hesitate to contact me at (410) 571-6179 or bherron@hannonarmstrong.com.
Very truly yours,
/s/ Brendan Herron
CONFIDENTIAL TREATMENT REQUESTED BY
HANNON ARMSTRONG SUSTAINABLE INFRASTRUCTURE CAPITAL, INC.
HA_0005
PURSUANT TO RULE 83
Mr. Eric McPhee
Mr. Paul Cline
United States Securities and Exchange Commission
Division of Corporation Finance
100 F Street, N.E.
Washington, D.C. 20549-0404
January 21, 2016
Enclosures
cc: Hannon Armstrong Sustainable Infrastructure Capital, Inc.
Steven L. Chuslo
Clifford Chance US LLP
Jay L. Bernstein
Andrew S. Epstein
CONFIDENTIAL TREATMENT REQUESTED BY
HANNON ARMSTRONG SUSTAINABLE INFRASTRUCTURE CAPITAL, INC.
HA_0006
PURSUANT TO RULE 83
Mr. Eric McPhee
Mr. Paul Cline
United States Securities and Exchange Commission
Division of Corporation Finance
100 F Street, N.E.
Washington, D.C. 20549-0404
January 21, 2016
Exhibit A
Hannon Armstrong Sustainable Infrastructure - Exhibit A
ARTICLE VI.
SERVICING AND
ADMINISTRATION OF RECEIVABLES
Section 6.1. The Servicer to Act as
Servicer.
(a) The Servicer, as an independent
contract servicer, shall service and administer the Trust Estate in accordance with the terms of this Indenture, including without limitation, the Servicing Guidelines. The Servicer agrees that its servicing of the Trust Estate shall be carried out
in accordance with customary and usual procedures of firms engaged in a similar business and, to the extent more exacting, the Servicing Guidelines. The Servicer shall exercise reasonable care and due diligence in the performance of its duties
hereunder.
(b) The Servicer
shall take such actions as may be necessary to ensure that the security interest granted by the Issuer hereunder shall continue to be a perfected security interest of first priority under applicable law and shall be maintained as such throughout the
term of this Indenture. Without limiting the generality of the foregoing, the Servicer shall prepare and file all
CONFIDENTIAL TREATMENT