Springleaf Financial, the Fortress Investment Group-owned subprime consumer lender, priced a longer-dated class A note in its second personal consumer loans bond of the year.
The deal, called Springleaf Trust 2015-B, is structured with a five-year revolving period, longer than any of issuer’s prior term securitizations, according to Kroll Bond Ratings. For example, Springleaf's previous deal, Springleaf Trust 2015-A, issued last February had a three-year revolving period.
The AA’ rated, $250-million, class A bond, structured with a weighted average life of 5.5 years, pays 190 basis points over interpolated swaps curve, yielding 3.5%, according to S&P. The notes benefit from 26.5% of credit enhancement.
By comparison, Springleaf Trust 2015-A priced the 3.5-year, class A bond at 182.5 basis points over interpolated swaps. The notes yielded 3.2%.
The notes were sold last week but Kroll published a presale report on the deal today. Apart from the 'AA' tranche the transaction includes $31.5 million of A’ rated class B notes, $12.7 million of BBB’ rated class C notes and $20.1 million of BB’ rated class D notes. Pricing information was not available for these notes.
Springleaf increased the concentration limit of unsecured loans to 30% in 2015-B from 25% in the 2015-A deal. It has also increased the minimum weighted average loan rate to 21.5% from 20.5% in the 2015-A transaction. The changes to the transaction pool resulted in a slightly higher base case annualized net loss expectation of 7.40%-9.40%, according to Kroll.
Borrowers in the SLFT 2015-B transaction have a lower weighted average FICO score of 604 compared to 609 in the previous deal and the loans are larger with a weighted average size of $4,264 compared to $3,915. The loans in the pool have an average term of 3.6 years.
Springleaf Trust 2015-B is the issuer’s first transaction following its March $4.2 billion acquisition of Citigroup’s OneMain Financial. The issuer expects to close it acquisition of OneMain in the third quarter of 2015. It plans to run the two businesses independently for the first year and then consolidate them over time. As part of that combination, it will integrate the companies’ systems as well as policies and procedures. It also expects to close approximately 200 branches, which is approximately 10% of the combined 1,967 branches (OneMain has 1,136 branches).
Although the combination will give Springleaf a stronger market position in the subprime consumer lending market, it will also increase leverage of the combined entity, according to the Kroll presale report. As a result, SFC’s corporate credit ratings of B’/ B2’ / B’ by Standard & Poor’s/ Moody’s Investor Service and Fitch Ratings, respectively, have been put on either CreditWatch negative or on review for downgrade by each agency.
