KBRA Affirms Ratings for OneMain Holdings, Inc. and Subsidiary

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

Key Credit Considerations

OneMain’s ratings remain supported by continued, favorable operating results – notwithstanding some slippage during 2023 and 1H24 (to 2.7% ROA and an adjusted ~2%, respectively) – generated by the industry leading consumer installment lender; multiyear performance that benefits substantially from a long operating history lending primarily to non-prime borrowers and a very capable management team. Supplementing its heritage, broad geographic U.S. branch footprint with an efficient digital origination platform, OneMain maintains 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. Additionally, the company’s longstanding business model that continues to incorporate extensive on-shore servicing capabilities and related staffing flexibility within OneMain’s existing employee base, is considered a distinct operating positive, particular for weaker economic environments.

Deliberately managed product diversification into well-conceived credit card products along with an indirect auto platform, is considered a constructive evolution of OneMain’s operating profile; one which should serve the company investor constituencies and borrowers well. Regarding some deterioration in OneMain’s asset quality from unsustainably pristine 2021 and more normalized 2022 performance, we continue to expect the company to reflect firmly better-than peer credit trends and produce comparatively solid risk-adjusted returns irrespective of operating environment.

While OneMain operates a market-funded business model, the company has prudently achieved a balanced term debt profile; utilizing both well laddered, senior unsecured debt and longstanding ABS programs, as well as maintaining substantial committed, multi-year conduit capacity as a contingent liquidity source. In recent years, the company’s superior liquidity and funding profile has been enhanced through the issuance of longer-term unsecured debt at attractive cost, a committed 5-year senior unsecured revolving credit facility, and whole loan flow sale agreements. Rate and credit market volatility has not impacted frequent, cost-effective ABS transactions (8 since YE21) and four unsecured senior note issues since 2Q23. OneMain’s total loss absorbing capacity (as a % of receivables) has remained reasonably stable in recent periods and is supportive of ratings.

Rating Sensitivities

Continued solid operating results in the more uncertain economic environment, along with more conservative capital management, would be important drivers of a positive rating action over time. An unexpected deterioration in asset quality, materially impacting earnings durability, could impact ratings stability, as could increasingly aggressive financial management.

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