Opportunity’s next ABS deal will include loans through the MetaBank partnership
Upcoming consumer loan securitization for Oportun Inc. (Nasdaq: OPRT) is expected to include loans from a new lending partnership established with MetaBank, which has extended Oportun’s high-risk loan program to thin file borrowers. at national scale.
The $ 500 million Opportunity Issuance Trust (OPTN) 2021-B will likely be the first of its 17 securitizations to include a larger share of loans partially secured by auto title loans.
According to pre-sale reports from rating agencies, Oportun will grant $ 230.2 million in loans to borrowers with no credit history or FICO credit ratings in a pool of collateral securing the issuance of four classes of notes.
But the loan pool will grow to $ 511.5 million between its scheduled closing on May 10 and the end of a three-month pre-financing period on July 31 – a period during which Oportun can issue additional loans to the pool from its portfolio of managed loans of $ 1.9. billion, as of December 31, 2020.
The loans will have to meet minimum criteria, but could potentially lower the credit parameters of the identified pool which includes a weighted average interest rate of 30.28% and average initial terms of 34 months with 10 months of seasoning.
The agreement also has a three-year revolving period during which new assets can be added to the pool, including renewal loans for existing customers (renewal loans already account for over 84% of loan balances in the initial OPTN 2021-B pool).
The transaction’s transaction settings also allow Oportun to include accounts created under its brand new secured loan program. Last April, the company launched a loan product that could be partially secured by an auto title.
While these secured loans are offered in California, the program is expected to expand to Florida, Texas, and possibly other states during the renewal period. Up to 10% of the OPTN 2021-B collateral pool can be secured loans.
Loans from its nationally chartered MetaBank partnership will also be part of the mix, according to pre-sale reports from Kroll Bond Rating Agency and DBRS Morningstar. This partnership is expected to launch in mid-2021 and expand Oportun’s lending programs outside of its current 12-state footprint from which it issues loans through state licenses.
DBRS and KBRA differ on the ratings of the notes in the transaction. KBRA applied a preliminary A rating to the tranche of $ 340.15 million Class A notes to which DBRS assigned an early AA rating. The $ 71.6 million Category B loans are rated BBB by KBRA and A by DBRS; On its own, DBRS has assigned ratings to the Class C Subordinated Notes (BBB) and Class D Notes (BB High).
Oportun will use the proceeds from the Notes to repay the balance of one of its 2018 securitization transactions and roll over existing loans into the new trust.
Kroll noted an expected net loss range of 8.8% to 10%, lower than Opportunity’s first trade in 2021 (which was 9.5% to 11.5%).