A pool of secured and unsecured personal installment loans to borrowers with limited credit histories is securing a pool of asset-backed securities from Oportun 2022-1. The trust is expected to issue $400 million in notes to investors.
Oportun, Inc., and EPO II are sponsors on the deal, which will issue the notes through three classes, although Kroll Bond Rating Agency will not provide ratings on the class C notes.
The trust will issue the notes through a sequential pay structure, where the class A notes receive principal payments in full before the subordinate notes receive payment. Goldman Sachs is the lead underwriter.
Wilmington Trust, National Association will act as trustee and owner trustee on the deal.
The KBRA expects to assign a rating of ‘A’ to the $348.6 million class A notes and ‘BBB’ to the $30.3 million class B notes. The notes benefit from a reserve account, overcollateralization, subordination and excess spread.
The deal is expected to close on March 31, according to DBRS | Morningstar, which expects to assign ratings ranging from ‘AA’ on the class A notes to ‘BBB’ on the class C notes.
Oportun uses a fintech-driven model to provide financing to borrowers with a lack of an established credit history, or whom traditional and mainstream financial institutions underserve.
Initially, overcollateralization is 5.0% of the cut-off pool balance, an amount that will increase to 12.0% of the current pool balance, subject to a floor equal to 1.0% of the cut-off pool balance. A reserve account funded at closing will equal about 0.25% of the current outstanding note balance. KBRA also noted that the reserve account is 0.24%, as a percentage of the initial collateral balance.
As for excess spread, Oportun Funding 2022-1 maintains about 21.4%, based on a 30.24% weighted average interest rate, minus servicing fees of 5.0%, and an assumed weighted average life adjusted note coupon of 3.8%.
A closer look at the collateral pool reveals assets with small balance loans made to borrowers with modest credit scores. Some 113,264 loans are in the pool, with an average balance of $3,717. On a weighted average (WA) basis, the pool has an interest rate of 30.2%, a VantageScore of 674, an original term of 36 months, and seasoning of four months.
California, Texas and Florida comprise the three states with the highest representation in the pool, with 46%, 28.3%, and 9.3%, respectively.
Oportun, Inc., is a wholly owned subsidiary of Oportun Financial Corp., a publicly traded consumer finance company. Since inception, the company had originated more than 4.9 million loans with a principal balance of more than $12 billion, and had $2.6 billion outstanding as of December.
