OneMain Financial Issuance Trust is preparing to raise $500 million from the capital markets with a consumer loan-secured asset-backed securities (ABS) that will see slight shift in reinvestment criteria during its revolving period.
The transaction, OneMain Financial Issuance Trust, 2022-2, will feature a two-year revolving period, compared with OMFIT 2022-S1, which has a three-year revolving period, according to Kroll Bond Rating Agency, which expects to assign ratings to the notes.
OneMain will issue notes through four classes and a senior-subordinate structure, according to KBRA. The repayment of notes do benefit from that structure, particularly the most senior class. Other forms of credit enhancement include a cash reserve account, excess spread and actions to be taken in the case of certain trigger events.
HSBC Bank will act as the indenture trustee, account bank and note registrar.
As for the cash reserve account, it will amount to 0.50% of the note balance, and 0.45% of the initial pool balance. On subsequent dates, the account in the reserve account will equal the sum of 0.50% of the aggregate note balance as of the preceding payment date, and $250,000, plus any additional amounts deposited into the account, according to KBRA.
Further, the notes in the deal generate about 15.4% in excess spread, based on a weighted average interest rate of 24.5%, minus about 3.5% in servicing fees and an assumed weighted average life adjusted note coupon of 5.56%, according to KBRA.
The timely repayment of notes in OneMain will also depend on certain trigger events. If an early amortization event occurs, the notes' revolving period would end and begin amortization. If the early amortization event is cured, the revolving period might be reinstated.
On average, the loans have a balance of $8,415, and on a weighted average basis the loans have an interest rate of 24.5%, original term of 58 months, and FICO score of 631.
KBRA expects to assign ratings of 'AAA' to the $359.8 million, class A notes; 'AA' on the $49.4 million, class B notes; and then 'A' and 'BBB' on the class C and class D notes, respectively.
