Personal consumer loans will provide the collateral for a $750 million issuance of notes from the OneMain Financial Issuance Trust, 2023-2.
The A, B, C and D classes of notes have credit support of about 48.4%, 41.4%, 36.5% and 29.2%, respectively, in the form of a reserve account, excess spread, overcollateralization and subordination, according to S&P Global Ratings. Ratings analysts said that its worst-case, base case loss for the transaction, on a weighted average (WA) basis is 11.76%. This, the rating agency said, is a function of the transaction-specific reinvestment criteria and actual OneMain loan performance.
Citigroup Global Markets is the lead underwriter on the deal, known at OMFIT 2023-2. OneMain Finance Corp., is servicer and administrator on the deal, and provides performance support.
Kroll Bond Rating Agency analysts also rate the notes, and say that the weighted average original loan term for OneMain's personal loan originations was about 58 months. The company allows renewals of personal loans to existing borrowers. The current pool does contain personal loan renewals, and they remain in the pool as eligible collateral during a three-year revolving period, the rating agency said.
Among key changes from the previous transaction is the inclusion f two pari-passu tranches, namely fixed-rate A-1 notes and floating-rate A-2 notes, according to S&P. They are indexed to the Secured Overnight Financing Rate (SOFR) and might constitute up to two-thirds of the class A notes. Initial, target and floor overcollateralization increased to 10.60%, from 10.35%.
Total credit support, including excess spread, to classes A, B, C and D notes mentioned earlier, were 49.8%, 42.9%, 37.9% and 30.4% on the OMFIT 2023-1, respectively. The limit for reinvestment criteria on unsecured loans increased to 62.5%, from 60.0% from OMFIT 2023-1, according to the rating agency.
The notes have a legal maturity date of Sept. 14, 2036. S&P expects to assign 'AAA' to the A-1 and A-2 notes, which are the senior notes. The B,C and D notes, the subordinate ones in the structure, will be rated 'AA', 'A' and 'BBB-', the rating agency said.
