DBRS Confirms Ratings on OneMain Financial Issuance Trust 2016-2

DBRS, Inc. (DBRS) has today confirmed the ratings on the following notes issued by OneMain Financial Issuance Trust 2016-2 (the Issuer):

-- Series 2016-2 Notes, Class A (Class A Notes) confirmed at AA (sf)
-- Series 2016-2 Notes, Class B (Class B Notes) confirmed at A (sf)
-- Series 2016-2 Notes, Class C (Class C Notes) confirmed at BBB (sf)
-- Series 2016-2 Notes, Class D (Class D Notes; collectively with the Class A, B and C Notes, the Notes) confirmed at BB (sf)

The ratings are based on DBRS’s review of the following analytical considerations:
-- Revision of the coupon rates for the Class C and Class D Notes. The Class C Notes’ coupon rate was reduced to 5.67% from 7.20%. The Class D Notes’ coupon rate was reduced to 6.43% from 8.69%. The reductions on the coupon rates are expected to result in greater excess spread for the transaction.
-- Transaction capital structure, proposed ratings and form and sufficiency of available credit enhancement.
-- The transaction parties’ capabilities with regard to origination, underwriting and servicing.
-- Credit quality of the collateral pool and historical performance.

The transaction is a securitization of unsecured consumer loans using a revolving period followed by sequential pay amortization. In the cash flow modeling of the expected excess cash flows available to the Issuer, various key factors affecting the performance of the collateral for the senior Notes over the life of the transaction are stressed to simulate a potential deterioration in the collateral’s performance. Key inputs in the cash flow modeling include charge-off rates and payment rates.

DBRS incorporated the projected excess cash flows generated in the cash flow modeling scenario into the priority of payments for the transaction. The cash flow modeling tested the ability of the Notes to pay interest at their respective interest rates and principal amounts in full by the final maturity date in accordance with the terms of the transaction documents.

The transaction was recently issued, closing in March 2016. The confirmation of the outstanding ratings reflects the current credit enhancement levels for the outstanding Notes provided by subordination, overcollateralization and the reserve account. As of the June 2016 payment date, the three-month average annualized charge-off rate was approximately 0.43%, which is within the expectations of 10.22%. The weighted-average coupon of the portfolio as of the same distribution date was 26.25%, which is in compliance with the transaction’s threshold of 22.00%. The weighted-average remaining term of the portfolio was 46 months, which is in compliance with the transaction’s limit of 50 months. Overcollateralization of $115,189,345 was above its required level of $110,002,661. Trigger thresholds that would result in early amortization are all currently in compliance.

Notes:
All figures are in U.S. dollars unless otherwise noted.

The applicable methodologies are Rating U.S. Structured Finance Transactions and U.S. Credit Card Asset-Backed Securities, which can be found on our website under Methodologies.

The rated entity or its related entities did participate in the rating process. DBRS had access to the accounts and other relevant internal documents of the rated entity or its related entities.