Subprime lender OneMain Holdings is coming to the securitization market for the first time since its predecessor, Springleaf Finance, acquired the OneMain business from Citigroup in November 2015.
The company is now the largest originator of personal loans in the U.S., with some 5,400 employees and 2.2 million customers. It has a decentralized operation with approximately 1,835 branches (696 legacy Springleaf Finance branches and 1,139 legacy OneMain Financial branches) in 44 states. This stronger market position came at the cost of additional leverage, however.
Prior to the acquisition, both Springleaf and OneMain funded lending in party by bundling loans into collateral for bonds. Both came to market multiple times in 2015, 2014, and 2013.
The new deal, Springleaf Funding Trust 2016-A, is backed by loans that are larger and less risky, by some metrics, than the previous three deals completed by the former Springleaf Finance, according to rating agency reports.
The securitization trust will issue four tranches of notes with preliminary ratings from Kroll Bond Rating Agency and DBRS: $337.17 million of Class A notes are rated double-A; $36.350 million of Class B notes are rated single-A ; $25.2 million of Class C notes are rated triple-B; and $25.87 million of Class D notes are rated double-B. Credit enhancement levels range from 25.4% for the Class A notes to 5.80% for the Class D notes.
All of the notes have a stated maturity of November 2029.
The transaction includes a two-year revolving period during which additional collateral may be acquired, so long as it complies with certain eligibility criteria.
The weighted-average remaining term of the collateral pool is approximately 38 months. The WA FICO score of the pool is 614.
The percentage of loans in the top three Springleaf risk score categories (S, P and A) is 39.73%. That’s up from 31.45%, 34.20%, 33.86% and 31.69% in the previous four deals.
Among other credit considerations, according to Kroll, is the fact that OneMain has diverse funding sources including unsecured debt, revolving term ABS, and multi-year revolving bank conduits. That’s important, because, in the event that credit market conditions deteriorate, and OneMain is unable to securitize loans, it can turn to other funding sources.
The transaction also benefits from a “warm” back-up servicer, Wells Fargo, that can step in should OneMain be unable to service it.