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Rating Action:

Moody's affirms OneMain Holdings' ratings following its sale of SpringCastle interest

01 Apr 2016

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
No Related Data.
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