VSLR Vivint Solar Inc

On August 3, 2018 (the “Closing Date”), Vivint Solar, Inc. (the “Company”) and certain of its subsidiaries entered into the transactions described in the press release noted in Item 7.01 below and attached hereto as Exhibit 99.1. As part of such transactions, Vivint Solar Asset 1 Project Company, LLC (“Borrower”), which is indirectly owned by the Company together with investors, entered into a loan agreement (the “Loan Agreement”) pursuant to which it may borrow up to an aggregate principal amount of $130.00 million with certain financial institutions for which Wells Fargo Bank, National Association is acting as administrative agent, collateral agent and depositary agent.

Borrower may make multiple borrowings under the loan agreement during the availability period, commencing on the Closing Date and continuing until late 2019 (the “Availability Period”). Proceeds of the loans will be used to (1) purchase residential solar projects from a wholly owned subsidiary of the Company, (2) fund certain reserve accounts, and (3) pay transaction costs and fees in connection with this transaction. After the Availability Period, all outstanding loans under the Loan Agreement will be aggregated into a single term loan (the “Term Loan”) with a maturity date 20 years after the date of aggregation. During the first 10 years after the date of aggregation (“Sweep Period”), principal payments will be determined in accordance with a target debt balance schedule to be generated based on the projected cash flows from the solar energy systems owned by the Borrower on the date of aggregation. Failure to make principal payments during the Sweep Period will not result in a default under the Loan Agreement. Instead, such principal payments that remain unpaid at the end of the Sweep Period will remain payable by the Borrower in accordance with a payment waterfall. After the Sweep Period, the Borrower will make mandatory payments of principal in accordance with an amortization schedule to be determined based on the projected cash flows from the solar energy systems owned by the Borrower on the date of aggregation.

Interest on each loan will accrue at an annual rate equal to the U.S. swap rate for the weighted-average life of such loan, plus an applicable margin equal to the greater of (a) 1.90% plus a spread adjustment based on the risk premium on the borrowing date relative to the market index-based risk premium on the Closing Date and (b) 1.50%. Scheduled principal payments are due on a quarterly basis, at the end of January, April, July and October of each year. Upon the occurrence of certain events, Borrower will be required to make prepayments of the loans, including the payment of a make-whole amount in certain circumstances.

The Loan Agreement includes customary events of default, conditions to borrowing and covenants, including negative covenants that restrict, subject to certain exceptions, the Borrower’s ability to incur indebtedness, incur liens, make fundamental changes to its business, make certain types of restricted payments and investments or enter into certain transactions with affiliates. The Borrower will fund a debt service reserve account on the Closing Date in an amount equal to the scheduled principal and interest payments over the succeeding six months. The Borrower’s ability to make distributions to the investors and the Company is subject to certain distribution conditions, including maintenance of a debt service coverage ratio of 1.15 to 1.00, no defaults, and funding of certain reserves.  

The obligations of the Borrower are secured by a pledge of the class B membership interests in the Borrower’s parent entity, a pledge of the membership interests in the Borrower, all of the Borrower’s assets, and contracts (and rights thereunder) held by Borrower relating to the purchase and sale of projects and maintenance and administrative services with respect to the projects owned by the Borrower.