Oportun, Inc., a publicly traded consumer finance company based in Menlo Park, California, sponsors the 18thNS Asset-backed securitization (ABS) business backed by fixed-income consumer installment loans.
Most of the transactions have been secured by unsecured loans, and now the Oportun Issuance Trust 2021-C is one of the first deals on the platform to be backed by Secured Personal Loans (SPL), according to the Kroll Bond Rating Agency.
As of the statistical calculation date, auto-title-backed personal loans accounted for approximately 1.72% of OPTN 2021-C’s collateral pool, according to KBRA.
The SPLs must not exceed 10% of the specified transaction concentration limits. The rating agency noted that SPL products may have a lower failure rate and higher recovery rate than their unsecured counterparts. For this transaction, however, KBRA kept the same failure and recovery assumptions as the comparable unsecured product from Oportun.
Currently, SPL products are only offered in California, Florida, and Texas, KBRA noted.
OPTN 2021-C will raise $ 500 million through four tranches of debt. KBRA expects to assign class A bonds an âAâ rating and class B bonds âBBBâ. The bonds have a credit rating improvement in the form of overcollateralization, subordination, reserve account and excess spread. Additionally, the transaction has an initial hard credit enhancement level of 26.5% for the Class A bonds and 14.9% for the Class B bonds.
The loans in the pool have balances between $ 300 and $ 12,300. Plus, they have an initial maturity of seven to 54 months and an annual percentage cap of 36%, KBRA said.
Oportun operates through government licenses and offers its credit products to low and middle income consumers with limited or no credit history. The average initial loan amount is $ 2,442 for new customers and $ 4,235 for renewal customers. The company’s average customer has approximately $ 50,000 gross annual income, and approximately 50% of Oportun’s new customers do not have a FICO score.
In August 2021, Oportun began offering loans as part of its partnership with MetaBank, National Association.
The transaction also has a three year revolving period which allows the transaction to fund new collateral as long as the collateral meets the eligibility criteria and concentration limits, KBRA said. Capital payments will not be made during the revolving period while the coverage tests are met. Among other things, the trust must hold the required over-collateral amount.
The deal provides for a quick payback. The trust has certain triggers which, when triggered, end the revolving period and start paying out the banknotes.