Outstanding Loans and Security Agreements

9 Months Ended

Sep. 30, 2020

Outstanding Loans and Security Agreements

The following is a summary of our debt as of September 30, 2020 (in thousands):


	Unpaid Principal Balance		Net Carrying Value						Unused Borrowing Capacity		Interest Rate	Maturity Dates	Entity	Recourse
			Current		Long- Term		Total

LIBOR + 4% term loan due November 2020	$	286	$	278	$	—	$	278	$	—	LIBOR plus margin	November 2020	Company	Yes

10% convertible promissory notes due December 2021	96,209		99,379		—		99,379		—		10.0%	December 2021	Company	Yes
10% notes due July 2024	79,000		16,000		60,743		76,743		—		10.0%	July 2024	Company	Yes
10.25% senior secured notes due March 2027	70,000		—		68,526		68,526		—		10.25%	March 2027	Company	Yes
2.5% green convertible senior notes due August 2025	230,000		—		98,212		98,212				2.5%	August 2025	Company	Yes
Total recourse debt	475,495		115,657		227,481		343,138		—

7.5% term loan due September 2028	35,087		2,696		29,522		32,218		—		7.5%	September 2028	PPA IIIa	No

6.07% senior secured notes due March 2030	78,710		3,695		74,151		77,846		—		6.1%	March 2030	PPA IV	No
LIBOR + 2.5% term loan due December 2021	117,947		7,609		109,536		117,145		—		LIBOR plus margin	December 2021	PPA V	No
Letters of Credit due December 2021	—		—		—		—		968		2.25%	December 2021	PPA V	No
Total non-recourse debt	231,744		14,000		213,209		227,209		968
Total debt	$	707,239	$	129,657	$	440,690	$	570,347	$	968

The following is a summary of our debt as of December 31, 2019 (in thousands):


	Unpaid Principal Balance		Net Carrying Value						Unused Borrowing Capacity		Interest Rate	Maturity Dates	Entity	Recourse
			Current		Long- Term		Total

LIBOR + 4% term loan due November 2020	$	1,571	$	1,536	$	—	$	1,536	$	—	LIBOR plus margin	November 2020	Company	Yes
5% convertible promissory note due December 2020	33,104		36,482		—		36,482		—		5.0%	December 2020	Company	Yes
6% convertible promissory notes due December 2020	289,299		273,410		—		273,410		—		6.0%	December 2020	Company	Yes
10% notes due July 2024	93,000		14,000		75,962		89,962		—		10.0%	July 2024	Company	Yes
Total recourse debt	416,974		325,428		75,962		401,390		—

7.5% term loan due September 2028	38,337		3,882		31,087		34,969		—		7.5%	September 2028	PPA IIIa	No

6.07% senior secured notes due March 2030	80,988		3,151		76,865		80,016		—		6.1%	March 2030	PPA IV	No
LIBOR + 2.5% term loan due December 2021	121,784		5,122		115,315		120,437		—		LIBOR plus margin	December 2021	PPA V	No
Letters of Credit due December 2021	—		—		—		—		1,220		2.25%	December 2021	PPA V	No
Total non-recourse debt	241,109		12,155		223,267		235,422		1,220
Total debt	$	658,083	$	337,583	$	299,229	$	636,812	$	1,220

Recourse debt refers to debt that we have an obligation to pay. Non-recourse debt refers to debt that is recourse to only our subsidiaries. The differences between the unpaid principal balances and the net carrying values apply to debt discounts and deferred financing costs. We were in compliance with all financial covenants as of September 30, 2020 and December 31, 2019.

Recourse Debt Facilities

LIBOR + 4% Term Loan due November 2020 - The weighted average interest rate as of September 30, 2020 and December 31, 2019 was 4.2% and 6.3%, respectively. As of September 30, 2020 and December 31, 2019, the unpaid principal balance of debt outstanding was $0.3 million and $1.6 million, respectively, and we are in compliance with all covenants, respectively.

10% Constellation Convertible Promissory Note due 2021 - On March 31, 2020, we entered the Constellation Note Modification Agreement, which amended the terms of the 5% Constellation Note to extend the maturity date to December 31, 2021 and increased the interest rate from 5% to 10% ("10% Constellation Note"). We further amended the 10% Constellation Note by reducing the strike price on the conversion feature from $38.64 per share to $8.00 per share.

When we evaluated the Constellation Note Modification Agreement in accordance with ASC 470-60, Debt - Troubled Debt Restructurings by Debtors ("ASC 470-60") and ASC 470-50, Debt - Modifications and Extinguishments ("ASC 470-50"), we concluded that the amendment did not constitute a troubled debt restructuring and, furthermore, the amendment qualified as a substantial modification as a result of the increase in the fair value of the conversion feature due to the reduced strike price. As a result, on March 31, 2020, the 10% Constellation Note, which consisted of $33.1 million in principal and $3.8 million in accrued and unpaid interest, was extinguished and the 10% Constellation Note was recognized at their fair market value, which equaled $40.7 million. The difference between the fair market value of the 10% Constellation Note and the carrying value of the 5% Constellation Note of $3.8 million was recognized as a loss on extinguishment of debt in the condensed consolidated statement of operations.

On June 18, 2020, Constellation exchanged their entire 10% Constellation Note at the conversion price of $8.00 per share into 4.7 million shares of Class A common stock. At the time of this exchange the unamortized premium of $3.4 million was recognized as an adjustment to additional paid-in capital.

10% Convertible Promissory Notes due December 2021 - On March 31, 2020, we entered into an Amendment Support Agreement with the noteholders of our outstanding 6% Convertible Notes pursuant to which such Noteholders agreed to extend the maturity date of the outstanding 6% Convertible Notes to December 1, 2021 and increase the interest rate from 6% to 10%. Additionally, the debt is convertible at the option of the Noteholders into common stock at any time through the maturity date and we further amended the 10% Convertible Notes by reducing the strike price on the conversion feature from $11.25 to $8.00 per share. In conjunction with entering into the Amendment Support Agreement, on March 31, 2020, we also entered into the 10% Convertible Note Purchase Agreement and issued an additional $30.0 million aggregate principal amount of 10% Convertible Notes to Foris Ventures, LLC, a new noteholder, and New Enterprise Associates 10, Limited Partnership, an existing noteholder. The 10% Convertible Notes and the $30.0 million new 10% Convertible Notes were all reflected in the Restated Indenture. The Amendment Support Agreement required that we repay at least $70.0 million of the 10% Convertible Notes on or before September 1, 2020. In return, collateral was released to support the collateral required under the 10.25% Senior Secured Notes, and 50% of the proceeds from the consummation of certain transactions, including equity offerings or additional indebtedness, will be applied to redeem the 10% Convertible Notes at a redemption price equal to 100% of the principal amount of the 10% Convertible Notes, plus accrued and unpaid interest, the aggregate sum of all remaining scheduled interest payments, discounted by a rate equal to the treasury rate plus fifty basis points, multiplied by a certain percentage (“Applicable Percentage”) that ranges from 0% to 100%, which is determined based on the time of redemption. If the redemption were to occur on or before October 21, 2020, the Applicable Percentage would be 0% and therefore, no redemption penalty would be incurred. If the redemption were to happen after October 21, 2020, the Applicable Percentage would be between 25% and 100%, determined based on the time of redemption. On May 1, 2020, we repaid $70.0 million of the 10% Convertible Notes and accrued and unpaid interest and recognized an adjustment to the unamortized debt premium of $4.3 million.

We evaluated the Amendment Support Agreement in accordance with ASC 470-60 and ASC 470-50 and concluded that the amendment did not constitute a troubled debt restructuring and, furthermore, the amendment qualified as a substantial modification as a result of the increase in the fair value of the conversion feature due to the reduced strike price. As a result, on March 31, 2020, we recognized a $10.3 million loss on extinguishment of debt in the condensed consolidated statement of operations, which was calculated as the difference between the reacquisition price of the 6% Convertible Notes and the carrying value of the 6% Convertible Notes. The total carrying value of the 6% Convertible Notes equaled $279.0 million, which consisted of $289.3 million in principal and $1.4 million in accrued and unpaid interest, reduced by $10.7 million in unamortized discount and $1.0 million in unamortized debt issuance costs. The total reacquisition price of the 6% Convertible Notes equaled $289.3 million, which consisted of the $340.7 million fair value of the 10% Convertible Notes, $1.4 million in accrued and unpaid interest, and $1.2 million of fees paid to noteholders as part of the amendment, reduced by $24.0 million, the fair value at March 31, 2020 of the embedded derivative relating to the equity classified conversion feature was reclassified from additional paid-in capital at the time of the debt extinguishment, $20.0 million cash received from the additional 10% Convertible Notes that were issued to New Enterprise Associates 10, Limited Partnership, and the $10.0 million issuance to Foris Ventures, LLC.

The new net carrying amount of the 10% Convertible Notes of $99.4 million, which consists of the $96.2 million principal of the 10% Convertible Notes, $3.2 million net of premium paid for the 10% Convertible Notes and debt issuance

costs was classified as current as of September 30, 2020. Furthermore, the $14.1 million deemed premium net of debt issuance costs is being amortized over the term of the 10% Convertible Notes using the effective interest method. The $96.2 million principal balance of 10% Convertible Notes due to the Canada Pension Plan Investment Board ("CPPIB") will be converted to 12.0 million shares of common stock in October 2020, and the unamortized premium of $3.2 million will be an adjustment to additional paid in capital.

10% Senior Secured Notes due July 2024 - The outstanding unpaid principal balance of the 10% Senior Secured Notes due July 2024 (the "10% Notes") of $16.0 million and $14.0 million were classified as current as of September 30, 2020 and December 31, 2019, respectively, and the net carrying amount of the 10% Notes of $60.7 million and $76.0 million were classified as non-current as of September 30, 2020 and December 31, 2019, respectively. The accrued unpaid interest balance on the 10% Notes was $1.3 million and $3.9 million as on September 30, 2020 and December 31, 2019, respectively.

10.25% Senior Secured Notes due March 2027 - On May 1, 2020, we issued $70.0 million of 10.25% Senior Secured Notes in the Senior Secured Notes Private Placement. The 10.25% Senior Secured Notes are governed by an indenture (the “Senior Secured Notes Indenture”) entered into among us, the guarantors party thereto and U.S. Bank National Association, in its capacity as trustee and collateral agent. The 10.25% Senior Secured Notes are secured by certain of our operations and maintenance agreements that previously were part of the security for the 6% Convertible Notes. We used the proceeds of this issuance to repay $70.0 million of our 10% Convertible Notes on May 1, 2020. The 10.25% Senior Secured Notes are supported by a $150.0 million indenture between us and U.S. Bank National Association, which contains an accordion feature for an additional $80.0 million of notes that can be issued within the next 18 months.

Interest on the 10.25% Senior Secured Notes is payable on March 31, June 30, September 30 and December 31 of each year, commencing June 30, 2020. The 10.25% Senior Secured Notes Indenture contains customary events of default and covenants relating to, among other things, the incurrence of new debt, affiliate transactions, liens and restricted payments. On or after March 27, 2022, we may redeem all of the 10.25% Senior Secured Notes at a price equal to 108% of the principal amount of the 10.25% Senior Secured Notes plus accrued and unpaid interest, with such optional redemption prices decreasing to 104% on and after March 27, 2023, 102% on and after March 27, 2024 and 100% on and after March 27, 2026. Before March 27, 2022, we may redeem the 10.25% Senior Secured Notes upon repayment of a make-whole premium. If we experience a change of control, we must offer to purchase for cash all or any part of each holder’s 10.25% Senior Secured Notes at a purchase price equal to 101% of the principal amount of the 10.25% Senior Secured Notes, plus accrued and unpaid interest. The outstanding unpaid principal of the 10.25% Senior Secured Notes of $70.0 million was classified as non-current as of September 30, 2020.

2.5% Green Convertible Senior Notes due August 2025 - In August 2020, we issued $230.0 million aggregate principal amount of our Green Notes unless earlier repurchased, redeemed or converted. The Green Notes were issued pursuant to, and are governed by, the Green Note Indenture. The principal amount of the Green Notes are $230.0 million, less initial purchaser's discount of $6.9 million and less other issuance costs of $3.0 million resulting in net proceeds of $220.1 million.

The Green Notes are senior, unsecured obligations accruing interest at a rate of 2.5% per annum, payable semi-annually in arrears on February 15 and August 15 of each year, beginning on February 15, 2021. Before the close of business on the business day immediately before May 15, 2025, noteholders will have the right to convert their Green Notes only upon the occurrence of certain events. From and after May 15, 2025, noteholders may convert their Green Notes at any time at their election until the close of business on the second scheduled trading day immediately before the maturity date.

At our option, we may settle conversions by paying or delivering, as applicable, cash, shares of our Class A common stock or a combination of cash and shares of our Class A common stock, at our election.

The initial conversion rate is 61.6808 shares of Class A common stock per $1,000 principal amount of notes, which represents an initial conversion price of approximately $16.21 per share of Class A common stock. The conversion rate and conversion price will be subject to customary adjustments upon the occurrence of certain events. In addition, if certain corporate events that constitute a “Make-Whole Fundamental Change” (as defined in the Green Note Indenture) occur, then the conversion rate will, in certain circumstances, be increased for a specified period of time.

In the accounting for the issuance of the Green Notes, we separated the $230.0 million aggregate principal amount into liability and equity components in accordance with ASC 470 – 20, Debt with Conversion and Other Options. The carrying amount of the liability components for the Green Notes of approximately $96.1 million was calculated by measuring the fair value of similar debt instruments that do not have an associated convertible feature and was classified as non-current debt on the condensed consolidated balance sheet. The carrying amount of the equity components for the Green Notes of approximately $133.9 million, representing the conversion option, was determined by deducting the carrying amount of the liability components from the principal amount of the notes. This difference between the principal amount of the notes and the liability

components represents the debt discount, presented as a reduction to the notes on our condensed consolidated balance sheets, and is amortized to interest expense using the effective interest method over the remaining term of the notes. The equity components of the notes are included in additional paid-in capital on our condensed consolidated balance sheets and is not remeasured as long as it continues to meet the conditions for equity classification.

We incurred issuance costs related to the Green Notes of approximately $9.9 million, consisting of the initial purchaser's discount of $6.9 million and other issuance costs of approximately $3.0 million. In accounting for the issuance costs, we allocated the total amount incurred to the liability and equity components using the same proportions determined above for the notes. Transaction costs attributable to the liability components for the Green Notes of approximately $4.3 million were recorded as debt issuance costs, presented as a reduction to the notes on our condensed consolidated balance sheets, and are amortized to interest expense using the effective interest method over the term of the notes. The issuance costs attributable to the equity components for the Green Notes were approximately $5.6 million and were recorded as a reduction to the equity component included in additional paid-in capital.

As of September 30, 2020, the remaining lives of the Green Notes are approximately 4.9 years, and are classified as long-term debt. The effective interest rate of the liability components for the Green Notes is 21.2% and is based on the interest rate of similar debt instruments, at the time of our offering, that do not have associated convertible features. Total interest expense recognized related to the Green Notes for the three and nine months ended September 30, 2020 was $2.9 million, comprised of contractual interest expense of $0.7 million, amortization of debt discount of $2.1 million and amortization of issuance costs of $0.1 million.

Non-recourse Debt Facilities

7.5% Term Loan due September 2028 - In December 2012 and later amended in August 2013, PPA IIIa entered into a $46.8 million credit agreement to help fund the purchase and installation of our Energy Servers. The loan bears a fixed interest rate of 7.5% payable quarterly. The loan requires quarterly principal payments which began in March 2014. The credit agreement requires us to maintain a debt service reserve for all funded systems, the balance of which was $3.8 million and $3.8 million as of September 30, 2020 and December 31, 2019, respectively, which was included as part of long-term restricted cash in the condensed consolidated balance sheets. The loan is secured by all assets of PPA IIIa.

6.07% Senior Secured Notes due March 2025 - The notes bear a fixed interest rate of 6.07% per annum payable quarterly, which began in December 2015 and ends in March 2030. The notes are secured by all the assets of the PPA IV. The note purchase agreement requires us to maintain a debt service reserve, the balance of which was $8.4 million as of September 30, 2020 and $8.0 million as of December 31, 2019, which was included as part of long-term restricted cash in the condensed consolidated balance sheets. The notes are secured by all the assets of the PPA IV.

LIBOR + 2.5% Term Loan due December 2021 - The outstanding debt balance of the LIBOR + 2.5% Term Loan of $7.6 million and $5.1 million were classified as current and $109.5 million and $115.3 million were classified as non-current as of September 30, 2020 and December 31, 2019, respectively.

In accordance with the credit agreement, PPA V was issued a floating rate debt based on LIBOR plus a margin, paid quarterly. The applicable margins used for calculating interest expense are 2.25% for years 1-3 following the Term Conversion Date and 2.5% thereafter. For the Lenders’ commitments to the loan and the commitments to a letter of credit ("LC") facility, the PPA V also pays commitment fees at 0.50% per annum over the outstanding commitments, paid quarterly. The loan is secured by all the assets of the PPA V and requires quarterly principal payments which began in March 2017. In connection with the floating-rate credit agreement, in July 2015, PPA V entered into pay-fixed, receive-float interest rate swap agreements to convert its floating-rate loan into a fixed-rate loan.

Letters of Credit due December 2021 - In June 2015, PPA V entered into a $131.2 million term loan due December 2021. The agreement also included commitments to a LC facility with the aggregate principal amount of $6.4 million, later adjusted down to $6.2 million. The amount reserved under the letter of credit as of September 30, 2020 and December 31, 2019 was $5.2 million and $5.0 million, respectively. The unused capacity as of September 30, 2020 and December 31, 2019 was $1.0 million and $1.2 million, respectively.

Related Party Debt

Portions of the above described recourse and non-recourse debt were held by various related parties. See Note 16, Related Party Transactions for a full description.

Repayment Schedule and Interest Expense

The following table presents detail of our outstanding loan principal repayment schedule as of September 30, 2020 (in thousands):


Remainder of 2020	$	100,063
2021	138,590
2022	34,393
2023	42,166
2024	49,886
Thereafter	342,141
	$	707,239

Total interest expense of $20.3 million and $22.9 million for the three months ended September 30, 2020 and 2019, respectively, was recorded in interest expense on the condensed consolidated statements of operations. Interest expense of $57.5 million and $70.7 million for the nine months ended September 30, 2020 and 2019, respectively, was recorded in interest expense and interest expense to related parties on the condensed consolidated statements of operations.