Bernard Tan, CEO of RE Royalties, joined Tim Nash, Founder of Good Investing, in a YouTube video interview to discuss the RE Royalties Green Bond offering and how you can build a cleaner future through sustainable investing.
Watch the interview on the Good Investing YouTube channel. Read the highlights below!
Tim Nash: RE Royalties trades on the venture exchange. Why did you decide to go public?
Bernard Tan: We did this when we first started the company 4 years ago. When some of our early investors took a chance on us as an unproven company, we told them that we would take the company public within 2-3 years. We have delivered on this promise and to this day almost all of them are still shareholders. Our team and Board believe that you should always under-promise and over-deliver, and we hope to continue to do this as we grow.
Tim Nash: Do you prefer one type of renewable energy right now?
Bernard Tan: We are technology agnostic because we believe that climate change is a global problem and you need an all hands-on deck approach to reduce carbon growth. Historically, most of our portfolio has been in solar and wind, two renewable energy types that have seen tremendous growth and efficiency in the past decade. We only invest in projects that provide immediate or near-term cash flow, have a long asset life, and the cash flows ultimately have a credit worthy customer like Hydro One or BC Hydro.
Tim Nash: Is RE Royalties currently rated by any of the big credit rating agencies?
Bernard Tan: We are not rated by any large credit agencies. This is due to our size and the cost to purchase a rating. Our preference is to utilize that cash to pay our bond holders, pay dividends to our shareholders, or invest in our targeted deal flow.
Tim Nash: In the worst-case scenario with RE Royalties defaulting, where are bondholders in line?
Bernard Tan: We currently have no secured debt, so bond holders are at the very front of the line. We built numerous protection mechanisms for both bond holders and our shareholders. For instance, we built in covenants such as a 1:1 debt equity ratio, which means the company will be prevented on taking on high levels of debt, which could cause a default. As a comparison, most large established renewable companies or utilities have a 3:1 or 4:1 debt equity ratio. If you look at some of our largest Big 5 banks, they are closer to 9:1 debt equity.
The other feature of our green bonds is that they are senior secured, which only represent about 5% of the green bond market.
About 60% are unsecured and the rest are asset backed. What that means is that in the event of a default, an asset backed is like a car loan. They can seize your car if you do not pay, but not your house. However, for senior secured, they can seize all your assets. That is the difference in what we are offering in our green bonds in terms of security. Bond holders have rights to not only the investments we make, but the investments we already have made in the event of a default.
Invest in sustainable projects across the globe and earn 6% annually while helping to build the world you want in the future with RE Royalties Green Bonds. Watch the interview on Tim’s YouTube channel here. Read the latest Green Bonds news for updates on the inaugural offering.