New York, August 03, 2021 -- Moody's Investors Service, ("Moody's") has upgraded OneMain Holdings,
Inc.'s ("OneMain") long-term Corporate Family Rating (CFR)
to Ba2 from Ba3. At the same time, Moody's has upgraded OneMain
Finance Corporation's issuer and senior unsecured ratings to Ba2 from
Ba3. The outlook is now stable reflecting Moody's view that
OneMain will maintain its good financial performance, existing risk
and leverage appetite and strong liquidity position over the next 12-18
months. This rating action concludes the review for upgrade that
Moody's announced on 3 May 2021.
Rating actions:
..Issuer: OneMain Holdings, Inc.
.... Corporate Family Rating, Upgraded
to Ba2 from Ba3
..Issuer: OneMain Finance Corporation
.... Issuer Rating, Upgraded to Ba2
from Ba3
.... Senior Unsecured Rating, Upgraded
to Ba2 from Ba3
.... Backed Senior Unsecured Rating,
Upgraded to Ba2 from Ba3
.... Senior Unsecured MTN Program Rating,
Upgraded to (P)Ba2 from (P)Ba3
. Backed Senior Unsecured Shelf, Upgraded to (P)Ba2
from (P)Ba3
..Issuer: AGFC Capital Trust I
.... Backed Preferred Stock, Upgraded
to B1(hyb) from B2(hyb)
Outlook Actions:
..Issuer: OneMain Holdings, Inc.
....Outlook, Changed To Stable From
Rating Under Review
..Issuer: OneMain Finance Corporation
....Outlook, Changed To Stable From
Rating Under Review
..Issuer: AGFC Capital Trust I
....Outlook, Changed To Stable From
Rating Under Review
RATINGS RATIONALE
Moody's said the one notch upgrade to OneMain's ratings reflects
the company's continued solid financial performance even during the weakened
operating environment amid high unemployment and low loan demand.
OneMain's profitability remained solid in 2020, with its Moody's-calculated
net income % average managed assets of 3.35%,
and its asset quality performance was strong with net charge-offs
of 5.45% of gross loans, as its customers benefited
from strong government stimulus and other consumer support measures.
OneMain's first half of 2021 earnings have been strong with a reported
return on average assets (ROA) of 6.8%, benefiting
from the release of loan loss reserves which contributed 24% of
pre-provision, pre-tax income.
Another key driver for the upgrade was the firm's demonstrated strong
liquidity management, which was displayed during the coronavirus
pandemic. OneMain's liquidity management reacted to sudden changing
market conditions at the onset of the coronavirus pandemic in March 2020
by building its cash position in large part by drawing down on its multiple
bank conduit lines. In doing so, OneMain confirmed its liquidity
runway, which management estimates to be in excess of 24 months,
enabling it to ensure continued operations despite market uncertainty.
OneMain has access to 13 revolving conduit facilities with multi-year
revolving periods, provided by a multiplicity of lenders with a
borrowing capacity of $7.3 billion and no amounts drawn
and $9.7 billion of unencumbered assets as of 30 June 2021.
OneMain's improved funding profile is further evidenced by the firm's
staggered maturity profile and decreasing reliance on confidence-sensitive
secured funding, with secured debt accounting for 35% of
gross tangible assets as of 31 March 2021, improved from 50%
at year-end 2016.
OneMain's ratings also considers the benefits to creditors from
the reduced ownership position by the Apollo-Varde Group following
recent stock sales, which requires Apollo-Varde Group to
reduce the number of board members it appoints. The ratings upgrade
reflects Moody's view that OneMain's future board structure
will not result in a material change to its risk and leverage appetite.
The rating action incorporates the benefits to creditors from its future
board structure resulting from this governance change under Moody's environmental,
social and governance (ESG) framework, given its positive implications
for OneMain's corporate governance.
The stable outlook reflects Moody's expectations that OneMain's financial
performance will continue to be solid as the benefit of reserve release
declines and operating conditions improve over the next 12-18 months.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
OneMain's ratings could be upgraded if: 1) the firm continues to
increase its use of and access to unsecured funding sources; 2) maintains
good financial performance with an ROA above 3.5%,
adequate capitalization with tangible common equity and loan loss reserves
above 12% of total managed assets and an asset quality performance
with net charge-offs below 6.5%; and 3) successfully
executes on its strategic priorities, including the launch of its
credit card product, without increasing the risk appetite of the
firm.
OneMain's ratings could be downgraded if: 1) the firm's profitability
and/or asset quality metrics deteriorate evidenced by ROA below 2%
and/or net charge-offs persistently above 7.5%;
2) Moody's observes an increase in the risk or leverage appetite of the
firm; or 3) Moody's believes OneMain will not maintain its liquidity
position.
The principal methodology used in these ratings was Finance Companies
Methodology published in November 2019 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1187099.
Alternatively, please see the Rating Methodologies page on www.moodys.com
for a copy of this methodology.
REGULATORY DISCLOSURES
For further specification of Moody's key rating assumptions and
sensitivity analysis, see the sections Methodology Assumptions and
Sensitivity to Assumptions in the disclosure form. Moody's
Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.
For ratings issued on a program, series, category/class of
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same series, category/class of debt, security or pursuant
to a program for which the ratings are derived exclusively from existing
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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
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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
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to rated entity, Disclosure from rated entity.
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Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.
Moody's general principles for assessing environmental, social
and governance (ESG) risks in our credit analysis can be found at http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1288435.
At least one ESG consideration was material to the credit rating action(s)
announced and described above.
The Global Scale Credit Rating on this Credit Rating Announcement was
issued by one of Moody's affiliates outside the EU and is endorsed
by Moody's Deutschland GmbH, An der Welle 5, Frankfurt
am Main 60322, Germany, in accordance with Art.4 paragraph
3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies.
Further information on the EU endorsement status and on the Moody's
office that issued the credit rating is available on www.moodys.com.
The Global Scale Credit Rating on this Credit Rating Announcement was
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for additional regulatory disclosures for each credit rating.
Megan Fox
Vice President - Senior Analyst
Financial Institutions Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
Andrea Usai
Associate Managing Director
Financial Institutions Group
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
Releasing Office:
Moody's Investors Service, Inc.
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JOURNALISTS: 1 212 553 0376
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