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OneMain earns 1st AAA from Kroll for unsecured consumer loan ABS

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OneMain Financial earned its first AAA from Kroll Bond Ratings on an unsecured consumer loan securitization.

The company’s latest transaction is backed by stronger collateral than its previous deal, completed in August. But it still had to increase the credit enhancement on the senior tranche.

Five tranches of notes will be issued in the transaction, OneMain Financial Issuance Trust 2018-1. The AAA-rated tranche benefits from 32.6% credit enhancement, up from 26.2% for the senior tranche of the August deal.

The new deal offers lower initial credit enhancement for the AA, A, BBB, and BB rated tranches compared to previous deal. This is due in part to the change in collateral composition and eligibility criteria in this transaction, according to Kroll.

The borrowers in the pool have a higher weighted average FICO score (632 vs. 615) and higher proportion of the top risk tier (20.17% vs. 13.29%). In addition, the collateral pool has a slightly larger average loan size ($6,045 vs. $5,968) and a higher weighted average borrower rate (26.24% vs. 25.29%).

In addition, the transaction has a three-year revolving period during which new collateral can be added, one year longer than the previous transaction, which had a two-year revolving period. However, OneMain and its predecessor Springleaf have historically issued securitizations with revolving periods as long as five years.

The transaction will only include personal loans from legacy OneMain branches at closing, but personal loans from legacy SFC branches can be added during the revolving period.

The deal comes to market as Fortress Investment Group, which owns 40.6% of OneMain, is in the process of selling its stake to two other investment firms, Apollo Global Management and Varde Partners. The sale, which was disclosed on Jan. 3, is expected to close in the second quarter.

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Consumer ABS