KBRA Affirms Ratings for OneMain Holdings, Inc. and Subsidiary

KBRA affirms the Issuer rating of BB+ for OneMain Holdings, Inc. (NYSE: OMF) (“OneMain” or “the company”), as well as the Issuer and senior unsecured debt ratings of BB+ for OneMain Finance Corporation (“OneMain Finance” or “OMFC”). Additionally, KBRA affirms the BB- rating for OMFC’s junior subordinated debt. The Outlook for all ratings is Positive.

Key Credit Considerations

OneMain’s ratings remain supported by continued, favorable operating results – notwithstanding some slippage in 1H23 – generated by the leading branch-based consumer installment lender; multiyear performance that benefits substantially from the company’s long operating history lending primarily to non-prime borrowers and led by a very capable management team. Regarding the recent deterioration in OneMain’s asset quality from unsustainably pristine 2021, and more normalized 2022 performance, we continue to expect firmly better-than-peer credit trends and solid risk-adjusted returns to be generated almost irrespective of the operating environment. In this regard, OneMain has supplemented its heritage, broad geographic U.S. branch footprint with a now well-developed digital origination platform; maintaining a robust consumer customer database, which together with the company’s strong data analytics, puts it in an enviable position to assess and price risk better than many competitors without such well-developed business models.

While OneMain operates a market-funded business model, the company has prudently achieved a balanced term debt profile; utilizing both well-laddered unsecured debt and longstanding ABS programs, as well as maintaining substantial committed, multi-year conduit capacity as a contingent liquidity source. Over recent years, the company’s superior liquidity and funding profile has been enhanced further through the issuance of longer-term unsecured debt at attractive costs, and a committed 5-year senior unsecured revolving credit facility (2026 maturity). Rate and credit market volatility has not precluded still cost-effective ABS transactions (7 since YE21) and a return to the unsecured debt market in June 2023.

OneMain’s total loss absorbing capacity – reserves plus tangible equity – relative to gross receivables has remained fairly stable over recent years, having drifted upwards in recent periods owing to conservative provisioning. The company’s current balance sheet composition, both with respect to loss absorbing capacity, as well as a very enviable liquidity profile, which includes the maintenance of substantial committed undrawn facilities, is supportive of the ratings.

Rating Sensitivities

Continued solid operating results in the more uncertain economic environment, along with similar or more conservative capital management, would be instrumental drivers of positive rating action. An unexpected deterioration in asset quality, materially impacting earnings durability, could reverse positive rating momentum, as could increasingly aggressive financial management.

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