OneMain Obtains 1st AAA from Kroll for Consumer Credit ABS

OneMain Financial earned its first AAA rating from Kroll Bond Ratings on an unsecured consumer loan securitization.

The company’s latest transaction is backed by stronger guarantees than its previous deal, completed in August. But it still had to increase the credit enhancement on the senior tranche.

Five tranches of notes will be issued in connection with the transaction, OneMain Financial Issuance Trust 2018-1. The AAA-rated tranche benefits from a credit enhancement of 32.6%, compared to 26.2% for the senior tranche of the August operation.

The new agreement provides lower initial credit enhancement for AA, A, BBB and BB rated tranches compared to the previous agreement. This is due in part to the change in collateral composition and eligibility criteria in this transaction, according to Kroll.

Borrowers in the pool have a higher weighted average FICO score (632 vs. 615) and a higher proportion of the highest risk level (20.17% vs. 13.29%). Additionally, the collateral pool has a slightly higher average loan size ($6,045 vs. $5,968) and a higher weighted average borrower rate (26.24% vs. 25.29%).

In addition, the transaction has a three-year renewable period during which new guarantees can be added, which is one year longer than the previous transaction, which had a two-year renewable period. However, OneMain and its predecessor Springleaf have historically issued securitizations with renewable periods of up to five years.

The transaction will only include personal loans from former OneMain branches at closing, but personal loans from former SFC branches may be added during the revolving period.

The deal comes to market as Fortress Investment Group, which owns 40.6% of OneMain, is in the process of selling its stake to two other investment firms, Apollo Global Management and Varde Partners. The sale, which was disclosed on January 3, is expected to close in the second quarter.

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