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KBRA Comments on Renovate America's Chapter 11 Filing
[December 28, 2020]

KBRA Comments on Renovate America's Chapter 11 Filing


Kroll Bond Rating Agency (KBRA) releases commentary following an announcement on December 22, 2020 that Renovate America Inc. (Renovate), a Property Assessed Clean Energy (News - Alert) (PACE) originator, has filed for bankruptcy under Chapter 11 of the US Bankruptcy Code.

Renovate has sponsored thirteen PACE ABS transactions that have outstanding KBRA ratings. The ABS (News - Alert) transactions are largely insulated from the financial performance of Renovate as the company only served as the Program Administrator for these transactions, has limited interaction with the underlying obligors, and has little control over the collateral performance. The servicing of the PACE assessments, including billing and collections, is performed by David Taussig & Associates, which serves as the Assessment Administrator.

On June 26, 2020, KBRA completed a surveillance review of the securitizations, which resulted in an affirmation of all outstanding KBRA ratings (see HERO Funding Comprehensive Surveillance Report 2020). Each of the eigteen KBRA-rated securities are senior in the respective securitization and have AAA (sf) ratings. The trusts are secured by limited obligation improvement bonds issued by counties in the states of California and Missouri, originated under the HERO program administered by Renovate. Despite COVID-19 and the challenges faced by Renovate, the PACE ABS transactions rated by KBRA have continued to perform and homeowner delinquency levels have remained below 3.0%.



PACE assessments are payable together with the property owner's ad valorem real estate taxes in equal semi-annual installments in California and annually in Missouri. Under California and Missouri law, PACE assessments have equal lien priority with real estate taxes and other special assessments and are senior to all non-tax liens, including mortgages.

The bankruptcy was a result of several factors, including the economic disruption caused by the pandemic, underwriting legislation passed in California in 2018, and lawsuits filed against the company. These regulatory and legal issues include the California legislation implementing strict standards focused on "ability-to-pay", making new originations more costly, and a putative class action lawsuit against Renovate citing various causes of action.


Finance of America Mortgage LLC (FAM) has placed a stalking horse bid for Renovate's Benji business, which provides home improvement financing solutions to homeowners. The bid placed by FAM will serve as the floor price for Renovate's Benji assets; however, another entity may outbid FAM at the bankruptcy auction that is yet to be held.

KBRA will continue to monitor the filing. Should developments arise such that we believe the outstanding ratings could be affected, KBRA will issue an update.

About KBRA

KBRA is a full-service credit rating agency registered as an NRSRO with the U.S. Securities and Exchange Commission. In addition, KBRA is designated as a designated rating organization by the Ontario Securities Commission for issuers of asset-backed securities to file a short form prospectus or shelf prospectus. KBRA is also recognized by the National Association of Insurance Commissioners as a Credit Rating Provider and is a certified Credit Rating Agency (CRA) with the European Securities and Markets Authority (ESMA). Kroll Bond Rating Agency Europe is registered with ESMA as a CRA.


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