OneMain Financial, a unit of Citigroup, plans to issue $738 million of securities backed by personal loans of up to $15,000 that are typically used for debt consolidation, home improvements, and other purposes.
The deal is part of Citi's program to offload OneMain loans in a bid to make the lender more profitable for a possible sale or spinoff later this year, according to several market reports. In October 2014, OneMain filed an S-1 registration statement with the SEC, preparing for a potential initial public offering.
OneMain first went on the block in 2009 as part of Citi’s strategy to sell units that were not part of its core business. With the latest deal, One Main 2015-1, Citigroup has securitized $2.4 billion of the consumer loans originated by OneMain.
DBRS rated the 2015-1 deal. On offer are $540 million of AA’-rated, class-A notes; $75 million of A’-rated class-B notes; $44 million of BBB’-rated, class-C notes; and $79 million of BB’-rated class-D notes. All the securities are due on March 2026.
Over the course of a three-year revolving period ending Dec 31, 2017 additional loans may be added to the trust. The pool is backed by loans with a weighted-average FICO of 640 and a WA remaning term of 4 years. The pool pays a WA interest rate of approximately 26.14%.
OneMain is both the originator and servicer for the 2015-1 deal. Wells Fargo Bank is the backup servicer for the transaction and has experience servicing unsecured personal loans. “The backup servicer mitigates potential servicing disruptions given that [OneMain] has decentralized servicing operations and has been deemed a non-core holding of Citigroup,” according to DBRS presale report.
OneMain has been profitable for the last four fiscal years (2011, 2012, 2013 and 2014). The originator had $8.3 billion in assets as of September 30, 2014, and lent approximately $4.2 billion in loans for the nine months ending September 2014, approximately 58% of which were in the form of new cash to borrowers, while the remaining percentage were for refinancing existing loans.