SOUTHERN CALIFORNIA EDISON Co 10-K Analysis & Summary – 3/14/2025

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SCE Trust VII 7.50% Trust Prefe

10-K

Annual report

Filing date:

03/14/2025

TLDR:

ELI5:

SCE Recovery Funding LLC issues special bonds backed by charges collected from Southern California Edison customers. This report says they’re doing a good job managing those bonds, but the company that handles payments to investors had a small hiccup (a one-day delay) in a different, but similar, bond deal. It’s something to keep an eye on.

Accession #:

0001193125-25-054792

Published on

March 16, 2025

Analyst Summary

SCE Recovery Funding LLC is an asset-backed securities issuer backed by recovery property from Southern California Edison (SCE).
The filing indicates overall compliance with servicing criteria by SCE, as attested by both management and independent auditors (PwC).
A material instance of noncompliance was identified by KPMG in the attestation report for The Bank of New York Mellon Trust Company, N.A., the Indenture Trustee, regarding timely remittances to investors in the Consumers 2023 Securitization Funding LLC transaction (a one-day delay in September 2024).
Financial statements and MD&A are omitted pursuant to General Instruction J of Form 10-K, focusing the analysis on compliance and servicing aspects.
SCE’s management asserts compliance with applicable servicing criteria as of and for the year ended December 31, 2024.
Remediation efforts are underway by The Bank of New York Mellon Trust Company, N.A., including a daily report to management identifying outstanding deal onboarding items.
The company’s primary activity revolves around the servicing of recovery property related to Southern California Edison (SCE).
Policies and procedures are in place to monitor performance triggers and events of default as per transaction agreements.
Payments are deposited into custodial accounts within specified timeframes, and disbursements are made by authorized personnel.
Monthly reconciliations are prepared for all bank accounts, reviewed, and approved, with reconciling items resolved within specified timeframes.
Reports to investors are maintained in accordance with transaction agreements and SEC requirements.

Opportunities and Risks

Opportunity: Continued compliance with servicing criteria maintains investor confidence and the integrity of the asset-backed securities.
Risk: The material instance of noncompliance by The Bank of New York Mellon Trust Company, N.A. could indicate a potential weakness in the broader servicing environment for asset-backed securities and warrants close monitoring.
Risk: Although the noncompliance does not directly involve SCE Recovery Funding LLC’s servicing, it could indirectly affect the company’s reputation if not properly addressed.

Potential Implications

Company Performance

Continued compliance with servicing criteria is crucial for maintaining the company’s ability to issue asset-backed securities.
Failure to address the noncompliance by the Indenture Trustee could lead to increased scrutiny from regulators and investors.
Maintaining strong servicing practices is essential for the long-term financial health of the company.

Stock Price

Since SCE Recovery Funding LLC is not a publicly traded company, there is no direct impact on its stock price.
However, any negative publicity or regulatory action related to the noncompliance could indirectly affect the perceived risk of investing in asset-backed securities issued by the company.

SEC Filing Report: SCE Recovery Funding LLC – Form 10-K (FYE 2024)

Executive Summary

This report analyzes the 2024 Form 10-K filing for SCE Recovery Funding LLC, an asset-backed securities issuer. The filing indicates overall compliance with servicing criteria, as attested by both management and independent auditors. However, the report highlights a material instance of noncompliance by The Bank of New York Mellon Trust Company, N.A., the Indenture Trustee, regarding timely remittances to investors in a separate securitization. While this noncompliance does not directly impact SCE Recovery Funding LLC, it warrants monitoring as it reflects on the overall servicing quality within the asset-backed securities structure. The overall assessment is neutral, focusing on maintaining awareness of the servicing environment.

Company Overview

SCE Recovery Funding LLC is a special-purpose entity created to issue asset-backed securities. These securities are backed by recovery property, which represents the right to collect specific charges from Southern California Edison Company’s (SCE) customers, authorized by the California Public Utilities Commission (CPUC). SCE acts as the servicer for these assets. The company is a wholly-owned subsidiary of SCE, which is a wholly-owned subsidiary of Edison International.

Detailed Analysis

Filing Highlights

* **Filing Type:** 10-K (Annual Report)
* **Reporting Period:** Fiscal Year Ended December 31, 2024
* **Auditor:** PricewaterhouseCoopers LLP
* **Key Personnel:** Brendan Bond (Vice President and Treasurer of Southern California Edison Company, as servicer)

Financial Statement Analysis

* The financial statements themselves are omitted pursuant to General Instruction J of Form 10-K, which is permissible for issuers of asset-backed securities that meet certain conditions. This means the analysis focuses on compliance and servicing aspects rather than traditional financial performance metrics.

Management’s Discussion and Analysis (MD&A)

* The MD&A is omitted, again due to General Instruction J. The focus is on compliance with servicing criteria.

Risk Factors

* Risk Factors are omitted pursuant to General Instruction J of Form 10-K.

Compliance and Servicing

* **Servicer Compliance Statement (Exhibit 35.1):** Brendan Bond, as Vice President and Treasurer of Southern California Edison Company, certifies that SCE has fulfilled all of its obligations under the Recovery Property Servicing Agreements in all material respects throughout the reporting period.
* **Assessment of Compliance with Servicing Criteria (Exhibit 33.1):** SCE’s management asserts compliance with applicable servicing criteria as of and for the year ended December 31, 2024. PricewaterhouseCoopers LLP issued an attestation report (Exhibit 34.1) supporting this assertion.
* **Indenture Trustee Compliance (Exhibits 33.2 & 34.2):** The Bank of New York Mellon Trust Company, N.A., as Indenture Trustee, also provides an assessment of compliance. However, KPMG LLP’s attestation report (Exhibit 34.2) reveals a *material instance of noncompliance*: amounts due to investors in the Consumers 2023 Securitization Funding LLC transaction were not remitted in accordance with the timeframes set forth in the transaction agreements. The specific instance was a one-day delay in a September 2024 distribution. Remediation efforts are underway, including a daily report to management identifying outstanding deal onboarding items.

Key Exhibits

* **Exhibit 31.1:** Certification by Brendan Bond regarding the accuracy of the report and compliance with servicing agreements.
* **Exhibit 33.1:** Report on Assessment of Compliance with Servicing Criteria for Asset-Backed Securities for SCE Recovery Funding LLC.
* **Exhibit 33.2:** ASSESSMENT OF COMPLIANCE WITH APPLICABLE SERVICING CRITERIA for The Bank of New York Mellon Trust Company, N.A.
* **Exhibit 34.1:** Report of Independent Registered Public Accounting Firm (PwC) on SCE’s compliance.
* **Exhibit 34.2:** Report of Independent Registered Public Accounting Firm (KPMG) on The Bank of New York Mellon Trust Company, N.A.’s compliance.
* **Exhibit 35.1:** Servicer Compliance Statement of Southern California Edison Company.

Red Flags

* The material instance of noncompliance by The Bank of New York Mellon Trust Company, N.A. is a red flag. While it doesn’t directly involve SCE Recovery Funding LLC’s servicing, it indicates a potential weakness in the broader servicing environment for asset-backed securities.

Conclusion and Actionable Insights

The 10-K filing for SCE Recovery Funding LLC indicates that SCE, as the servicer, is in compliance with the applicable servicing criteria. However, the identified noncompliance by the Indenture Trustee warrants attention.

**Recommendations:**

* **Monitor Remediation Efforts:** Track the progress of The Bank of New York Mellon Trust Company, N.A.’s remediation efforts to ensure the issue is resolved and doesn’t recur.
* **Assess Potential Impact:** Evaluate whether the Indenture Trustee’s noncompliance could indirectly affect SCE Recovery Funding LLC’s operations or reputation.
* **Review Servicing Agreements:** Periodically review the servicing agreements to ensure they adequately address potential servicing disruptions or failures by any party involved.

This analysis provides a snapshot of SCE Recovery Funding LLC’s compliance as of December 31, 2024, based on the information available in the Form 10-K filing. Continuous monitoring of the servicing environment and adherence to best practices are crucial for maintaining the integrity of the asset-backed securities.

Commentary

Based on the provided document excerpts, SCE Recovery Funding LLC appears to be a special purpose entity created to issue asset-backed securities. The company’s primary activity revolves around the servicing of recovery property related to Southern California Edison (SCE). The document focuses heavily on compliance with servicing criteria for asset-backed issuers, indicating a strong emphasis on regulatory adherence. There is no information about the financial performance of the company.

Financial Ratio and Metric Analysis

Due to the nature of the provided document (primarily focused on compliance and servicing agreements) and the lack of comprehensive financial statements, a complete financial ratio analysis is not possible. The document does not contain the necessary financial data (e.g., revenue, expenses, assets, liabilities, equity) to calculate the standard financial ratios.

Profitability

Gross Profit Margin: Cannot be calculated due to lack of revenue and cost of goods sold data.
Operating Profit Margin: Cannot be calculated due to lack of operating income data.
Net Profit Margin: Cannot be calculated due to lack of net income data.
Return on Assets (ROA): Cannot be calculated due to lack of net income and total assets data.
Return on Equity (ROE): Cannot be calculated due to lack of net income and total equity data.
Earnings Per Share (EPS): Cannot be calculated due to lack of net income and outstanding shares data.

Liquidity

Current Ratio: Cannot be calculated due to lack of current assets and current liabilities data.
Quick Ratio (Acid-Test Ratio): Cannot be calculated due to lack of liquid assets and current liabilities data.
Cash Ratio: Cannot be calculated due to lack of cash and current liabilities data.

Solvency/Leverage

Debt-to-Equity Ratio: Cannot be calculated due to lack of total debt and total equity data.
Debt-to-Assets Ratio: Cannot be calculated due to lack of total debt and total assets data.
Interest Coverage Ratio (Times Interest Earned): Cannot be calculated due to lack of earnings before interest and taxes (EBIT) and interest expense data.

Activity/Efficiency

These ratios are generally not applicable to this type of entity, as it is not involved in typical sales or production activities.

Inventory Turnover: Not applicable.
Days Sales Outstanding (DSO): Not applicable.
Days Payable Outstanding (DPO): Not applicable.
Asset Turnover: Cannot be calculated due to lack of revenue and total assets data.

Valuation

Valuation ratios are not applicable as the company is not publicly traded and lacks the necessary financial data.

Price-to-Earnings Ratio (P/E): Not applicable.
Price-to-Book Ratio (P/B): Not applicable.
Price-to-Sales Ratio (P/S): Not applicable.
Enterprise Value to EBITDA (EV/EBITDA): Not applicable.

Growth Rates

Growth rates cannot be calculated due to the lack of revenue and net income data.

Revenue Growth: Not applicable.
Net Income Growth: Not applicable.
EPS Growth: Not applicable.

Other Relevant Metrics

The document focuses on compliance with servicing criteria as defined in Regulation AB. Key aspects include:

Monitoring Performance and Events of Default: Policies and procedures are in place to monitor performance triggers and events of default as per transaction agreements.
Cash Collection and Administration: Payments are deposited into custodial accounts within specified timeframes, and disbursements are made by authorized personnel.
Account Maintenance: Transaction-related accounts are separately maintained at federally insured depository institutions.
Reconciliations: Monthly reconciliations are prepared for all bank accounts, reviewed, and approved, with reconciling items resolved within specified timeframes.
Investor Reporting: Reports to investors are maintained in accordance with transaction agreements and SEC requirements.
Pool Asset Administration: Collateral and security on pool assets are maintained, and pool assets are safeguarded as required by transaction agreements.

The document includes certifications from Southern California Edison Company and The Bank of New York Mellon Trust Company, N.A., attesting to compliance with these servicing criteria. An attestation report from PricewaterhouseCoopers LLP also supports this compliance.