| Item 1.01. | Entry into a Material Definitive Agreement. |
Purchase Agreement
On September 22, 2023, Sunnova Energy International Inc. (the “Company”) and its subsidiaries, Sunnova Energy Corporation (the “Issuer”) and Sunnova Intermediate Holdings, LLC (the “Subsidiary Guarantor” and, together with the Company and the Issuer, the “Sunnova Entities”) entered into a purchase agreement (the “Purchase Agreement”) with J.P. Morgan Securities LLC, as representative of the several initial purchasers named therein (the “Purchasers”). Pursuant to the Purchase Agreement, the Issuer agreed to issue and sell $400 million aggregate principal amount of its 11.750% Senior Notes due 2028 (the “Notes”). The Notes were priced at 97.262% of par to yield 12.5%. The Notes will be fully and unconditionally guaranteed by the Company and the Subsidiary Guarantor. The net proceeds from the sale of the Notes (after deducting the Purchasers’ discount and estimated offering expenses) are expected to be approximately $382.6 million. The offering of the Notes is expected to close, subject to customary closing conditions, on September 26, 2023. The Issuer intends to allocate an amount equal to the net proceeds from the offering to finance or refinance, in whole or in part, existing or new eligible green projects, and pending such use, the Issuer will maintain or apply the net proceeds in accordance with its normal liquidity practices.
The Purchase Agreement includes customary representations, warranties and covenants by the Sunnova Entities and customary closing conditions. Under the Purchase Agreement, the Sunnova Entities and the Purchasers agreed to indemnify the other party against certain liabilities.
The Notes were offered in a private placement to persons reasonably believed to be qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”) and to non-U.S. persons outside of the United States under Regulation S of the Securities Act. The Notes have not been and will not be registered under the Securities Act or the securities laws of any other jurisdiction and may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements under the Securities Act and other applicable securities laws.
The foregoing description of the Purchase Agreement is not complete and is qualified in its entirety by reference to the full text of the Purchase Agreement, which is filed as Exhibit 10.1 to this Current Report on Form 8-K and is incorporated into this Item 1.01 by reference.
Statements in this Current Report on Form 8-K, including but not limited to those relating to the closing of the offering of the Notes, use of proceeds and other statements that are not historical facts, are forward looking statements that are based on current expectations. Although the Company believes that its expectations are based on reasonable assumptions, it can give no assurance that these expectations will prove correct. Important factors that could cause actual results to differ materially from those in the forward-looking statements include market conditions, risks regarding financing and other risks described in the Company’s Form 10-K for the year ended December 31, 2022 and its other filings with the United States Securities and Exchange Commission.
| Item 7.01. | Regulation FD Disclosure. |
In connection with the pricing of the Notes Offering, the Company revised the previously disclosed definition of Cash Flow Available for Debt Service or “CFADS” that will be included in the indenture governing the Notes and used solely for the purposes of calculating compliance with certain of the restrictive covenants thereunder as follows:
We define Cash Flow Available for Debt Service or “CFADS” as (a) net cash from (used in) operating activities of Sunnova and its subsidiaries calculated in accordance with GAAP and, (b) to the extent not duplicative, cash provided from activities from solar energy systems and/or an ancillary technology (“Projects”) when received by the Project company, excluding, in the case of each of clause (a) and (b) above, the effect of the following items: derivative origination and breakage fees from financing structure changes, payments to dealers for exclusivity and other bonus arrangements, net inventory and prepaid inventory (sales) purchases, payments of non-capitalized costs related to acquisitions and capital markets activities of the Company or Sunnova, payments of direct sales costs, excluding inventory, to the extent the related solar energy system is financed through a loan, payments to installers and builders for homebuilder asset-development activities, payments of customer rewards and including the effect of the following items: principal proceeds from customer notes receivable, financed insurance payments, distributions to redeemable noncontrolling interests and noncontrolling interests plus interest payments made on indebtedness other than non-recourse financing, minus principal payments on non-recourse financings constituting securitizations, other than principal repayments funded in exchange for, or out of or with the net cash proceeds of (i) any non-recourse financing, (ii) any indebtedness
