A portfolio of nonprime consumer loans will secure $187.3 million in securitization bonds from the Regional Management Issuance Trust, series 2024-1, and it is the program's return to the capital market after an absence of almost two years.
The deal, slightly smaller than the last offering from the Regional Management Issuance program, will issue class A, B, C and D notes through four tranches, according to DBRS Morningstar. All of the notes, which are fixed-rate have a legal final maturity date of July 15, 2036, according to a presale report from S&P Global Ratings.
Slated to close on June 13, Regional Management Issuance will pay notes on the 15 of each month, beginning in July 2024, DBRS said. With a May 31, 2024 initial cut-off date, the transaction has a three-year revolving period ending May 31, 2027.
Regional Management has 343 branch locations across 19 states as of the cutoff date, and it had about 540,600 active accounts.
DBRS analysts say overcollateralization, subordination, a reserve account and excess spread all help ensure the timely repayment of notes. Initially, the notes benefit from 13.15% in overcollateralization, while the non-declining reserve account represents 0.50% of the initial loan pool balance at the deal's inception.
As for the collateral, DBRS says Regional originated the loans under the company's Branch Loan and Convenience Check loan programs. Regional Management's target market is generally 56-year-old customer with an annual income of $50,000 and has credit scores between 540 and 700, DBRS said. For this transaction, borrower credit scores on the underlying loans that are less than 661 exceeds 70%, according to the rating agency. While underwriting and marketing decisions vary, the typical Regional Management customer uses the loan proceeds to pay household bills, consolidate debt or make home and auto repairs.
J.P.Morgan Securities is the lead underwriter on the deal, according to S&P.
S&P assigns ratings of AAA, AA, A+ and BBB to classes A, B, C and D, while DBRS gives the A, B, C and D notes AAA, AA, A and BBB ratings, it said.
