New York, April 01, 2016 -- Moody's Investors Service affirmed the B3 corporate family rating
of OneMain Holdings, Inc. ("OneMain Holdings")
and the senior unsecured rating of Springleaf Finance Corporation ("Springleaf
Finance"), as well as the B2 senior unsecured rating of OneMain
Financial Holdings, LLC ("OneMain Financial") all with a stable
outlook, following the company's announced sale of its equity
stake in SpringCastle.
RATINGS RATIONALE
The ratings affirmation follows OneMain Holdings' announced sale
of its ownership interest in SpringCastle, a joint venture in which
OneMain Holdings owns a 47% equity stake. SpringCastle is
an entity that owns a portfolio of $1.6 billion in loans
consisting of second-lien residential mortgages and unsecured consumer
loans and is currently in a liquidation mode.
The transaction will result in meaningful deleveraging for OneMain Holdings,
which is a positive credit development. Moody's estimates
that OneMain Holdings' capitalization, measured as tangible
common equity to tangible assets, will improve to approximately
5% on a pro-forma basis from 3.2% at December
31, 2015. The equity increase results from the elimination
of the company's negative non-controlling interest in the
joint venture and from a gain on the asset sale. In addition,
its debt will decline by $1.9 billion from the elimination
of the SpringCastle securitization obligations, which are consolidated
on OneMain Holdings' balance sheet.
While the deleveraging is a credit positive, the integration of
Springleaf Holdings Inc. and OneMain Financial (old OneMain) still
presents significant execution challenges given its complexity.
In addition, the combined entity has yet to demonstrate the profitability
of its franchise -- its 4Q15 results contained significant amounts
of acquisition-related charges, which weakened its capitalization
relative to Moody's expectations.
Upward rating pressure could develop after two or three consecutive quarters
of strong, clean results as evidenced by solid profitability,
ample liquidity, and successful execution of key integration milestones.
The ratings could be upgraded if OneMain Holdings demonstrates consistency
in operating results, including solid profitability, and continues
to de-lever by building its equity through earnings retention -
particularly if it demonstrates a clear path to building capital beyond
6% of tangible common equity to tangible managed assets.
OneMain Holdings' ratings could be downgraded as a result of weak
performance, which would be evidenced by financial losses and weakening
of its capitalization. Ratings could also be downgraded if Moody's
believes OneMain Holding's refinancing risk has increased,
particularly in light of its $1.9 billion of its debt obligations
maturing in 2017.
OneMain Financial's ratings are closely aligned with those of OneMain
Holdings and therefore would likely be upgraded or downgraded together
with the ratings of OneMain Holdings. In addition, OneMain
Financial's ratings could be downgraded if its leverage increases substantially,
if its profitability meaningfully weakens, or if the structural
protections afforded to it through its debt indenture covenants were weakened
and no longer provided the credit protection they do today.
Today's actions include:
OneMain Holdings, Inc.
Corporate Family Rating: B3, affirmed
Senior Unsecured Shelf: (P)Caa2, affirmed
Subordinated Shelf: (P)Caa3, affirmed
Junior Subordinated Shelf: (P)Ca, affirmed
Outlook: Stable
Springleaf Finance Corporation:
LT Issuer: B3, affirmed
Senior Unsecured: B3, affirmed
Senior Unsecured MTN Program: (P)B3, affirmed
Senior Unsecured Shelf: (P)B3, affirmed
Subordinated Shelf: (P)Caa1, affirmed
Junior Subordinated Shelf: (P)Caa2, affirmed
Outlook: Stable
OneMain Financial Holdings, LLC:
Senior Unsecured: B2, affirmed
Outlook: Stable
AGFC Capital Trust I
BACKED Pref. Stock: Caa2(hyb), affirmed
Outlook: Stable
The principal methodology used in these ratings was Finance Companies
published in October 2015. Please see the Ratings Methodologies
page on www.moodys.com for a copy of this methodology.
REGULATORY DISCLOSURES
For ratings issued on a program, series or category/class of debt,
this announcement provides certain regulatory disclosures in relation
to each rating of a subsequently issued bond or note of the same series
or category/class of debt or pursuant to a program for which the ratings
are derived exclusively from existing ratings in accordance with Moody's
rating practices. For ratings issued on a support provider,
this announcement provides certain regulatory disclosures in relation
to the credit rating action on the support provider and in relation to
each particular credit rating action for securities that derive their
credit ratings from the support provider's credit rating.
For provisional ratings, this announcement provides certain regulatory
disclosures in relation to the provisional rating assigned, and
in relation to a definitive rating that may be assigned subsequent to
the final issuance of the debt, in each case where the transaction
structure and terms have not changed prior to the assignment of the definitive
rating in a manner that would have affected the rating. For further
information please see the ratings tab on the issuer/entity page for the
respective issuer on www.moodys.com.
For any affected securities or rated entities receiving direct credit
support from the primary entity(ies) of this credit rating action,
and whose ratings may change as a result of this credit rating action,
the associated regulatory disclosures will be those of the guarantor entity.
Exceptions to this approach exist for the following disclosures,
if applicable to jurisdiction: Ancillary Services, Disclosure
to rated entity, Disclosure from rated entity.
Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.
Please see www.moodys.com for any updates on changes to
the lead rating analyst and to the Moody's legal entity that has issued
the rating.
Please see the ratings tab on the issuer/entity page on www.moodys.com
for additional regulatory disclosures for each credit rating.
Anna Sherbakova
Analyst
Financial Institutions Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Robert Young
MD - Financial Institutions
Financial Institutions Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Moody's affirms OneMain Holdings' ratings following its sale of SpringCastle interest