NEW YORK, Feb 5 (IFR) - Struggling US lender Springleaf
Financial, in the midst of a restructuring to stave off
bankruptcy, has raised eyebrows in the market with the first US
personal loan ABS offering since 1998.
The repackaging of its loans as asset-backed securities
(ABS) comes as Springleaf faces questions over the
size of its debt obligations coming due in the next few years.
Unlike auto loans and mortgages, personal consumer loans are
only rarely securitized, or bundled together as underlying
collateral for securities publicly sold to investors.
Springleaf, which is 20 percent owned by US bailout
recipient AIG, has not been shy about testing investor appetite
since the onset of the financial crisis.
In August the lender sold US$970 million of securities
backed by subprime residential mortgages, as it scrambled to
raise cash to pay down US$2 billion of debt due by end 2012.
It was the third subprime RMBS (residential mortgage-backed
security) sold publicly in the United States since the onset of
the financial crisis, which was sparked by bad subprime mortgage
loans. All were sold by Springleaf.
At the same time, as part of its restructuring, Springleaf
has decided to stop providing residential mortgage loans and is
closing all branches in 14 states.
Rated Caa1/CCC by Moody's and Standard & Poor's, the
Indiana-based lender is expected to offer US$500 million of
senior fixed-rate bonds and US$104 billion subordinated bonds in
its new ABS offering.
The average balance of loans in the underlying collateral
pool is approximately US$3,500, and the weighted average FICO
credit score of the recipients is a relatively very low 602.
While Springleaf has significant debt obligations coming
due, S&P said that the company's current liquidity was adequate
to meet its obligations into 2014 without issuing further debt.
But the ratings agency also said it was concerned that
Springleaf is highly leveraged - with a long-term debt to equity
ration of 9.6:1 - and has more than US$12.6 billion in debt.
"While the company has addressed its short-term liquidity
concerns through 2014, it has pressing liquidity needs after
2014, which would coincide with the amortization phase of this
transaction," S&P said.
The loan pool for the new deal, likely to be offered for
sale to the public next week, is expected to be around 90%
comprised of so-called hard secured loans - that is, loans
secured by a lien on the personal assets of recipients such as
autos, motorcycles and recreation vehicles.
Citigroup (structuring lead), Bank of America and Credit
Suisse are the underwriters for the new deal from Springleaf,
which was formerly known as American General Finance.