Kroll Bond Rating Agency (KBRA) assigns preliminary ratings to four classes of notes issued by OneMain Financial Issuance Trust 2020-2 ("OMFIT 2020-2"), a consumer loan asset-backed securities transaction.
The collateral in the OMFIT 2020-2 transaction includes approximately $526.3 million of loans, as of the July 31, 2020 initial cutoff date. The transaction includes a five-year revolving period during which additional collateral may be funded in the transaction so long as it complies with certain eligibility criteria. The preliminary ratings reflect the initial credit enhancement levels ranging from 30.55% for the Class A notes to 5.95% for the Class D notes.
The financial impact of COVID-19 has resulted in an economic slowdown and high unemployment, which can adversely impact the performance of the subject pool and unsecured consumer loans in general. In considering this risk, KBRA increased its base case default assumptions for the subject pool in a manner that was consistent with recent portfolio reviews of the sector that were highlighted in reports published on July 15, 2020 and April 21, 2020. None of the outstanding OneMain sponsored or serviced transactions’ note ratings were placed on Watch due to the enhancement levels in the transactions as well as OneMain’s demonstrated willingness to support their securitizations through voluntary actions, including the substitution of delinquent collateral and the inclusion of additional enhancement. In addition, OneMain’s disaster recovery plan, the geographic diversity of the collateral pool, transaction structure, and inclusion of a backup servicer may serve to mitigate the impact of the situation.
OneMain Holdings, Inc. ("OMH" or "OneMain") is a consumer finance company which offers loan products through a nationwide network of branches and through its online platform. OMH completed its acquisition of OneMain Financial Holdings, LLC ("OMFH") on November 15, 2015 from CitiFinancial Credit Company for $4.49 billion in cash. OMH is now listed on the NYSE under the ticker symbol "OMF".
KBRA applied its Global Consumer Loan ABS Rating Methodology and Global Structured Finance Counterparty Methodology as part of its analysis of the transaction’s underlying collateral pool, the proposed capital structure and legacy OMFH and legacy Springleaf’s historical annualized gross and net loss data. KBRA also conducted an operational assessment of OneMain, as well as a review of the transaction’s legal structure and transaction documents. KBRA will review the operative agreements and legal opinions for the transaction prior to closing.
Further information on key credit considerations, sensitivity analyses that consider what factors can affect these credit ratings and how they could lead to an upgrade or a downgrade, and ESG factors (where they are a key driver behind the change to the credit rating or rating outlook) can be found in the full rating report referenced above.
A description of all substantially material sources that were used to prepare the credit rating and information on the methodology(ies) (inclusive of any material models and sensitivity analyses of the relevant key rating assumptions, as applicable) used in determining the credit rating is available in the U.S. Information Disclosure Form located here.
Information on the meaning of each rating category can be located here.
Further disclosures relating to this rating action are available in the U.S. Information Disclosure Form referenced above. Additional information regarding KBRA policies, methodologies, rating scales and disclosures are available at www.kbra.com.
KBRA is a full-service credit rating agency registered as an NRSRO with the U.S. Securities and Exchange Commission. In addition, KBRA is designated as a designated rating organization by the Ontario Securities Commission for issuers of asset-backed securities to file a short form prospectus or shelf prospectus. KBRA is also recognized by the National Association of Insurance Commissioners as a Credit Rating Provider and is a certified Credit Rating Agency (CRA) with the European Securities and Markets Authority (ESMA). Kroll Bond Rating Agency Europe is registered with ESMA as a CRA.
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