Consumer lender One Main is launching a new ABS

Consumer finance company OneMain is launching a half-billion dollar consumer loan asset-backed security (ABS), the first one for 2022 and the fourth one of its kind for the firm over the last two years.

The OneMain Financial Issuance Trust 2022-S1 (OMFIT-2022-1) has a $361.210-million tranche rated ‘AAA,’ providing credit enhancement levels of 33.96 %; a $48.62-million tranche rated ‘AA,’ providing credit enhancement of 25.01%; a $30.42-million tranche rated ‘A,’ with a credit enhancement of 19.41%; and a $59.750-million tranche rated ‘BBB,’ providing credit enhancement of 8.41% by the Kroll Bond Rating Agency (KRBA) in an April 18 pre-sale report. April 27 is the transaction date.

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This latest ABS is smaller than the $904 million, $1.05 billion, and $967 million OMFIT ABS’ previously issued over the last two years.

The latest deal will be sponsored and serviced by OneMain Finance Corp, a seasoned lender. Over the last nine years, OneMain has issued six auto loan term and 24 consumer loan securitizations through its subsidiaries, according to the pre-sale report. OMFIT 2022-S1 is the company’s first ABS that is aligned with the 2021 social bond principles from the International Capital Market Association. The money from the issuance is expected to be used for a social project that provides access to social economic advancement or essential services for the betterment of society, according to the association’s philosophy. OMFIT 2022-S1 loans in the collateral pool will be made to rural borrowers, who are often underserved, the KBRA report wrote.

OneMain, which operates the largest branch-based consumer finance company in the United States, has a management team with more than a quarter of a century of experience, KBRA said in its report.

The OMFIT 2022-1 pool balance is $543.185 billion and has 67,256 loans with an average balance of $8,076. The weighted average interest rate is 24.79% and the weighted average remaining terms is 47 months. The borrowers have a weighted average FICO score of 629.

The typical OneMain customer has creditworthiness, but is part of a middle-income market that is not often served by traditional banking institutions, KBRA said. The average borrower is 48 years old with a net household income of $45,000. Seventy-five percent of the loans in OMFIT 2022-21 were made to borrowers who earned less than $50,000 annually, KBRA said.

The OMFIT 2022-S1 pool is 51% unsecured loans and 49.9% secured loans.

KBRA expressed concern in the pre-sale report that the government’s Coronavirus relief funds and other programs that allowed positive credit performances for consumers are no longer available. IN addition, the current inflation and supply chain issues can be harmful to consumer confidence.

However, as a positive, “the gross excess spread before losses is about 16.75%, based on a weighted average interest rate of 24.79% less 3.5% servicing fees and weighted average life adjusted note coupon of 4.5 %,” the pre-sale report said.