Oportun Financial Corp., a specialty subprime lender to Hispanic communities in the U.S., is back with its third securitization of small consumer loans.
The latest asset-backed transaction, Opportun Funding IV, LLC, Series 2016-C is a $125 million offering of two classes of notes. The Class A notes atop the capital stack are sized at $103 million with 30% credit enhancement, followed by the Class B notes totaling $22 million, with 15% CE. The notes are backed by a pool of 63,244 loans totaling $147 million.
Kroll Bond Rating Agency as assigned a preliminary ‘A’ structured finance rating to the Class A notes and a ‘BBB’ to the B notes. The interest rates on the notes will be determined at closing. The transaction has a two-year revolving period for additional collateral.
The loans have an average loan balance of $2,325, a significant jump from Oportun’s previous ABS transaction last July, with a $1,892 average). The average APR coupon is up slightly to 32.81%, while there is a marginal decline in the average seasoning to three months from four months.
The loan balances range from $300 to $7,200, at terms from six to 38 months. Repeat customers with loans in the pool may be eligible for renewal loans for as much as $8,200, which could raise the maximum loan balance of the aggregate pool.
Oportun, headquartered in Redwood City, Calif., focuses on Hispanic consumers with limited or no credit history. Approximately 36% of new customers have no credit score, according to KBRA.
However, 68% also have no derogatory credit history, and have Vantage score averages of 671 – the highest Vantage level an Oportun transaction has received to date. The renewal rate on the loans in the pool is 76.71%, slightly down from Oportun’s previous transaction in July, but above the three prior deals dating back to the start of 2015.
Previous transactions are also performing in line with KBRA’s annualized loss expectations, with a 4.17% delinquency rate for its 14-month seasoned 2015-B transaction.
The company underwrites to an internal risk management system, utilizing data such as residency and employment. Oportun does not verify immigration status, which raises concerns from KBRA that the questionable legal status of customers could increase default levels in the pool in the borrowers leave the country.
Oportun, formerly known as Profeso Financier Holdings, has conducted six prior consumer loan ABS transactions since 2013.
Oportun finances the loans through $1.3 billion in debt facilities, including its prior asset-backed securitizations (totaling $752 million) and two bank facilities – a $200 million warehouse facility and a $110 million whole-loan sale facility. According to KBRA, Oportun is in discussions with lenders to extend the latter facility by a year.
Oportun is certified as a Community Development Financial Institution by the U.S. Treasury, and operates through 205 branch locations in either standalone stores or co-location booths or kiosks within grocery stores. Staffers at these branches handle payments and loan processing.
While there are approximately 50,000 alternative payment locations across the country (including MoneyGram, 7-Eleven and Family Dollar locations), about 45% of loan payments in Oportun’s portfolio are made in person and in cash at these retail branch locations. Around 48% of payments are cleared through automated clearing house payments.
Nearly 75% of the collateral loan originations are concentrated in California and about 20% in Texas.