DBRS Morningstar Assigns Provisional Ratings to OneMain Financial Issuance Trust 2021-1

DBRS, Inc. (DBRS Morningstar) assigned provisional ratings to the following classes of notes to be issued by OneMain Financial Issuance Trust 2021-1 (OMFIT 2021-1 or the Issuer):

-- $* Series 2021-1, Class A-1 rated AAA (sf)
-- $* Series 2021-1, Class A-2 (together with the Series 2021-1, Class A-1 Notes, the Class A Notes) rated AAA (sf)
-- $54,790,000 Series 2021-1, Class B rated AA (sf)
-- $33,510,000 Series 2021-1, Class C rated A (sf)
-- $57,710,000 Series 2021-1, Class D rated BBB (sf)

*The total amount of Class A Notes will be $353,990,000, of which the Class A-2 Notes will constitute up to $118,000,000.

The ratings are based on a review by DBRS Morningstar of the following analytical considerations:

-- The transaction assumptions consider DBRS Morningstar’s set of macroeconomic scenarios for select economies related to the Coronavirus Disease (COVID-19) pandemic available in its commentary “Global Macroeconomic Scenarios: March 2021 Update,” published on March 17, 2021. DBRS Morningstar initially published macroeconomic scenarios on April 16, 2020, which have been regularly updated. The scenarios were last updated on March 17, 2021, and are reflected in DBRS Morningstar's rating analysis.
-- The assumptions consider the moderate macroeconomic scenario outlined in the commentary, with the moderate scenario serving as the primary anchor for current ratings. The moderate scenario factors in increasing success in containment during the first half of 2021, enabling the continued relaxation of restrictions.
-- Transaction capital structure, proposed ratings, and form and sufficiency of available credit enhancement.
-- The ability of the transaction to withstand stressed cash flow assumptions and repay investors according to the terms under which they have invested. For this transaction, the ratings address the timely payment of interest on a monthly basis and principal by the legal final maturity date.
--The Class A for the new structure will be split between a fixed rate A-1 tranche and a floating rate A-2 tranche. The Class A-2 floating rate will be benchmarked to the Secured Overnight Financing Rate (SOFR). The Interest Rate on the Class A-2 shall be not less than 0% since the sum of the SOFR Rate plus the applicable margin could be less than 0%.
-- OneMain Financial, Inc.’s (OneMain) capabilities with regard to originations, underwriting, and servicing.
-- The credit quality of the collateral and performance of OneMain’s consumer loan portfolio. DBRS Morningstar used a hybrid approach in analyzing the OneMain portfolio that incorporates elements of static pool analysis, employed for such assets as consumer loans, and revolving asset analysis, employed for such assets as credit card master trusts.
-- The legal structure and presence of legal opinions that address the true sale of the assets to the Issuer, the nonconsolidation of the special-purpose vehicle with OneMain, that the trust has a valid first-priority security interest in the assets, and the consistency with DBRS Morningstar’s “Legal Criteria for U.S. Structured Finance.”
-- Credit enhancement in the transaction consists of overcollateralization (OC), subordination, excess spread, and a reserve account. The initial amount of OC is 6.00% of the aggregate Loan Principal Balance. The subordination in the transaction refers to the Class B Notes, Class C Notes, and Class D Notes, which are subordinate to the Class A Notes. The Reserve Account Required Amount will be the sum of (1) the greater of (A) 0.50% of the Aggregate Note Principal Balance (0.47% of the initial collateral balance) of the immediately preceding Payment Date and (B) $250,000 and (2) an amount equal to the aggregate amount of all deposits made to the Reserve Account. Initial Class A credit enhancement of 33.92% includes a 0.47% reserve account, OC of 6.00%, and 27.45% of subordination. Initial Class B credit enhancement of 23.62% includes a 0.47% reserve account, OC of 6.00%, and 17.15% of subordination. Initial Class C credit enhancement of 17.32% includes a 0.47% reserve account, OC of 6.00%, and 10.85% of subordination. Initial Class D credit enhancement of 6.47% includes a 0.47% reserve account and OC of 6.00%.

DBRS Morningstar has updated its charge-off rate assumption to 10.15% in this transaction. The charge-off rate assumption for the OMFIT 2020-2 transaction was 11.50%. The decrease in charge-off rate assumption is because of the increasing success in coronavirus containment during the first half of 2021, enabling the continued relaxation of coronavirus-related restrictions and positive economic growth.

ESG CONSIDERATIONS
A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework can be found in the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings at https://www.dbrsmorningstar.com/research/373262.

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

The principal methodologies are Rating U.S. Structured Finance Transactions (November 6, 2020) and Rating U.S. Credit Card Asset-Backed Securities (August 7, 2020), which can be found on dbrsmorningstar.com under Methodologies & Criteria.

For more information regarding rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/357883.

For more information regarding structured finance rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/358308.

For more information regarding the structured finance rating approach and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/359905.

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

Please see the related appendix for additional information regarding the sensitivity of assumptions used in the rating process.

The full report providing additional analytical detail is available by clicking on the link under Related Documents below or by contacting us at [email protected].

For more information on this credit or on this industry, visit www.dbrsmorningstar.com or contact us at [email protected].

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