Oportun, Inc., a Menlo Park, Calif.-based, publicly traded consumer finance company, is sponsoring the 18th asset-backed securitization (ABS) deal collateralized by fixed-rate, consumer installment loans.
Most of the deals were backed by unsecured loans, and now the Oportun Issuance Trust 2021-C is one of the first deals on the platform to be backed by secured personal loans (SPL), according to Kroll Bond Rating Agency.
As of the statistical calculation date, personal loans backed by automobile titles accounted for about 1.72% of OPTN 2021-C’s collateral pool, KBRA said.
The SPLs cannot exceed 10% per the established transaction concentration limits. The rating agency noted that SPL products may have a lower default rate and higher recovery rate that their unsecured counterparts. For this transaction, however, KBRA maintained the same default and recovery assumptions as Oportun’s comparable unsecured product.
Currently, SPL products are only offered in California, Florida and Texas, KBRA noted.
OPTN 2021-C will raise $500 million through four tranches of notes. KBRA expects to assign an ‘A’ rating to the class A notes, and ‘BBB’ to the class B notes. The notes have credit enhancement in the form of overcollateralization, subordination, a reserve account and excess spread. Further, the transaction has initial hard credit enhancement levels of 26.5% for the class A notes and 14.9% for the class B notes.
The loans in the pool have balances that range from $300 to $12,300. Also, they have an original terms ranging from seven to 54 months, and have an annual percentage rate cap of 36%, KBRA said.
Oportun operates through state licenses and offers its loan products to low-and moderate-income consumers with limited or no credit history. On average, original loan sizes to new customers is $2,442, and $5,235 for renewal customers. The company’s average customer has an annual gross income of approximately $50,000, and about 50% of Oportun’s new customers do not have a FICO score.
In August 2021, Oportun began offering loans through its partnership with MetaBank, National Association.
The deal also has a three-year revolving period which allows the transaction to fund new collateral, as long as the collateral meets the eligibility criteria and concentration limits, KBRA said. Principal payments will not be made during the revolving period so long as the coverage tests are satisfied. Among other requirements, the trust has to maintain the required overcollateralization amount.
The deal makes provisions for a rapid amortization event. The trust features certain triggers that, when tripped, will end revolving period and begin paying down the notes.
