OneMain preps 1st ABS backed by combined businesses

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OneMain Financial is marketing its first offering of bonds backed both by consumer loans originated by both its legacy branches and by the Springleaf branches it acquired from Citigroup in 2015.

Since the acquisition, OneMain has securitized loans from the two different businesses in separate transactions. In 2016, it did three deals via a OneMain platform; so far this year it has done one via a Springleaf platform.

While the new deal, dubbed OneMain Financial Issuance Trust (OMFIT) 2017-1, is branded as OneMain, the loans were underwritten using Springleaf’s risk scores, which were adopted company-wide in October 2016.

A total of $639.06 million of notes will be issued across five tranches. Two classes of senior notes, one fixed-rate and one floating-rate, totaling $495.12 million that benefit from $26.2% credit enhancement are provisionally rated double A by both KBRA and S&P Global; a $39.32 million tranche with 20.3% credit enhancement is rated single A; a $42.98 million tranche with 13.85% credit enhancement is rated triple B, and a $61.64 million tranche with 4.6% credit enhancement is rated double B.

All of the notes have a legal, final maturity of September 2032.

Credit Suisse Securities, Barclays Capital, Goldman Sachs, Sandler O'Neill & Partners, The Williams Capital Group, and Drexel Hamilton are the underwriters.

The transaction includes a two-year revolving period during which additional collateral may be funded in the transaction so long as it complies with certain eligibility criteria.

Compared with the most recent OneMain-branded transaction, completed in December 2016, the loans used as collateral have lower FICOs (a weighted average 615 vs. 642), lower average balance ($6,175 vs. $7,010), and lower average borrower rate (25.29% vs 26.13%). According to KBRA, these changes reflective of the change in underwriting towards the legacy Springleaf approach.

Notably, a larger portion of loans backing this deal are secured (35.06% vs. 14.49%) by what S&P describes as "titled assets," such as automotive, vehicles, and boats

Accordingly, OMFIT 2017-1 benefits from lower initial credit enhancement as well as lower target than the OMFIT 2016-3 transaction. This is due in part to the change in collateral composition and eligibility criteria in this transaction, which is similar to the Springleaf transactions, per KBRA.

The initial reserve account is smaller than the OMFIT 2016-3 transaction (0.5% of the initial collateral pool balance vs. 1.0% of the initial collateral pool balance) but in line with the Springleaf transaction.

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