Nonbank lender Oportun is making its fifth trip to the securitization market with a $124.8 million offering that is backed by fewer loans, but higher balances, than previous deals.
Oportun Funding II LLC Series 2016-A is issuing two tranches of notes that have been granted provisional ratings in a pre-sale report issued Wednesday by Kroll Bond Rating Agency: An ‘A’-rated, $102.8 million Class A structure due 2021 that carries a 31% credit enhancement, and a $22 million Class B tranche due 2021 that has a CE of 15% and a ‘BBB’ rating.
The notes are backed by a $146.9 million pool of personal consumer loans issued by the Redwood City, Calif., finance company to a primarily low-income, Hispanic immigrant customer base that has little or no credit-file history. The loans are originated in retail locations in five states – with more than 75% issued in California – for customers that average 669 on the subprime-oriented VantageScore credit scoring system.
The pool comprises 68,252 loans, far fewer than the 96,762 marketed last July in Oportun’s 2015-B securitization. However, Oportun (formerly Progreso Financiero Holdings Inc.) is marketing larger-size loans than last year’s ABS, with an average balance of $2,152 compared to $1,520 last July. Oportun offers loans of six to 35 months with a borrowing range between $300 and $6,200 at its 179 in-store and standalone locations.
The interest rates on the loans are high, at an average of 32.6%, but Kroll points out that this is far less than rates offered by alternative finance companies. Oportun is recognized by the U.S. Treasury as a Community Development Financial Institution, a designation showing that Oportun has a primary mission to serve predominantly low-income or underserved populations.
Oportun’s last four securitizations total over $477 million.
The credit enhancement on the two new notes issues is comprised of overcollateralization, subordination of junior note classes and excess spread. While the transaction does not include a reserve account, Kroll stated that the CE is sufficient to cover stressed cash flow assumptions.
Deutsche Bank is the trustee.